Q1 2024 Spin Master Corp Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the Spin Master First Quarter 2024 Results Conference Call. At this time, all lines are in a listen-only mode.
Good morning, ladies and gentlemen, and welcome to the spin Master first quarter 2024 results conference call. At this time all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session.
Operator: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, May 8th, 2024. I would now like to turn the conference over to Sophia Bisoukis. Please go ahead.
Speaker Change: But any time during this call get acquired and we just assistance. Please press star zero for the operator.
Sophia Bisoukis: This call is being recorded on Wednesday may eight 2024, I would now like to turn the conference over to Sofia Bazookas. Please go ahead.
Sophia Bisoukis: Thank you, John, and good morning. Welcome to Spin Master's Financial Results Conference call for the first quarter of 2024. I am joined this morning by Max Rangel, Spin Master's Global President and CEO, and Mark Segal, Spin Master's Chief Financial Officer. For your convenience, the press release, MD&A, and in-term consolidated financial statements are available on the Investor Relations section of our website at spinmaster.com and on CDER+. Before we begin, please note that remarks on this conference call may contain forward-looking statements about Spin Master's current and future plans, expectations, intentions, results, level of activity, performance, goals, or achievements, and any other future events or developments.
Sophia Bisoukis: Thank you John and good morning, welcome to spin Master's financial results Conference call for the first quarter 2024, I'm joined this morning by Max Wrangle spin master's global President and CEO and Mark Segal spin master's Chief Financial Officer.
Sophia Bisoukis: For your convenience the press release MD&A and in term consolidated financial statements are available on the Investor Relations section of our website at spin Master Dot com and on SEDAR.
Sophia Bisoukis: Forward-looking statements are based on information currently available to management and on estimates and assumptions made based on factors that management believes are appropriate and reasonable in the circumstances. However, there can be no assurance that certain estimates or assumptions will prove to be correct. Many factors could cause actual results to differ materially from those expected or implied by the forward-looking statement. As a result, Spin Master cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on these forward-looking statements.
Sophia Bisoukis: Before we begin please note that remarks on this conference call may contain forward looking statements about spin master's current and future plans expectations intentions results levels of activity performance goals or achievements and any other future events or developments.
Sophia Bisoukis: Forward looking statements are based on information currently available to management and on estimates and assumptions made based on factors that management believes are appropriate and reasonable in the circumstances.
Sophia Bisoukis: There can be no assurance that certain estimates or assumptions will prove to be correct. Many factors could cause actual results to differ materially from those expected or implied by the forward looking statements.
Sophia Bisoukis: As a result spin master cannot guarantee that any forward looking statements will materialize and you're cautioned not to place undue reliance on these forward looking statements.
Sophia Bisoukis: Although acceptance may be required by law, Spin Master has no obligation to update or revise any forward-looking statements, whether because of new information, future events, or otherwise. For additional info on these assumptions and risks, please consult our cautionary statements regarding forward-looking information in our earnings release dated May 7, 2024. And please note that Spin Master reports in U.S. dollars, and all dollar amounts to be expressed today are in U.S. currency, unless otherwise noted. I would now like to turn the call over to Max.
Sophia Bisoukis: Except as may be required by law spin Master has no obligation to update or revise any forward looking statements, whether because of new information future events or otherwise for additional info on these assumptions and risks. Please consult our cautionary statements regarding forward looking information in our earnings release dated May seven 2024, and please note that spin.
Max: Mr reports in U S dollars and all dollar amounts to be expressed today are in U S currency unless otherwise noted.
Sophia Bisoukis: I would now like to turn the call over to Max.
Max Rangel: Good morning everyone. Before we get into details, I wanted to briefly reflect on the tremendous growth and evolution of Spin Master as we celebrate our 30th anniversary in May. It's quite remarkable how we've grown from our beginnings as an innovative Canadian start-up toy manufacturer to become a global, fully imagined children's entertainment company. We've continued to build on our legacy as a disruptor in the toy category with a long track record of breakthrough items such as Bakugan, Hatchimals, and Bitsy and have expanded our robust portfolio through licensing partnerships, international growth, and close to 30 acquisitions. Our entertainment creative center has developed a diverse slate of captivating multi-platform content for kids around the world, and our Digital Games Creative Center is expanding our mobile player ecosystem.
Max: Good morning, everyone before we get into details I wanted to briefly reflect on the tremendous growth and evolution of spin master as we celebrate our 30 <unk> anniversary in May.
Max Rangel: It's quite remarkable how we've grown from our beginnings.
Max Rangel: An innovative Canadian startup toy manufacturer to become a global fully imagine children's Entertainment company.
Max Rangel: We've continued to build on our legacy as a disruptor in the toy category.
Max Rangel: With a long track record of breakthrough items, such as Bakugan <unk> and bitchy.
Max Rangel: We have expanded our robust portfolio through licensing partnerships international growth and close to 30 acquisitions. Our entertainment Creative Center has developed a diverse slate.
Max Rangel: A slate of captivating multiplatform content for kids around the world.
Max Rangel: And our digital games Creative center, expanding our mobile player ecosystem.
Max Rangel: Our strategy to reimagine everyday play is positioning us where kids play and engage. Our Q1 performance reflected an increase in total revenue of 16.5%, primarily due to the addition of Melissa and Doug and their trusted portfolio of early childhood play offerings, which are highly complementary to our existing business. Excluding Melissa and Doug, revenue was up 1.6%.
Max Rangel: Our strategy to re imagine everyday play is positioning us to where kids play and engage.
Max Rangel: Our Q1 performance reflected an increase in total revenue of 16, 5% primarily due to the addition of Melissa Doug.
Max Rangel: <unk> trusted portfolio of early childhood play offerings, which are highly complementary to our existing business.
Max Rangel: Excluding Melissa Doug revenue was up one 6%.
Max Rangel: Toy gross product sales were $264 million, an increase of 22.1%. Most of this increase was from Alicent Dock; excluding MND, toy gross product sales were slightly up. We continue to see global macroeconomic forces at play, which are putting pressure on consumers' discretionary spending. We expect this environment will continue throughout 2024 as consumers manage through the impact of high interest rates and inflation. With rising prices for basics like shelter, food, and energy, consumers are feeling the pinch.
Max Rangel: Toy gross product sales were $264 million, an increase of 22, 1% most.
Max Rangel: Most of this increase was from Elisa, Doug excluding <unk>.
Max Rangel: <unk> gross product sales were slightly up.
Max Rangel: We continue to see global macroeconomic forces at play which are putting pressure on consumers' discretionary spending we expect this environment will continue throughout 2024 as consumers manage through the impact of high interest rates and inflation.
Max Rangel: With rising prices and basics like shelter food and energy consumers are feeling the pinch as a result demand and daughters spend for many general merchandise categories will be under pressure in 2024, according to serve Kona.
Max Rangel: As a result, demand and dollar spend for many general merchandise categories will be under pressure in 2024, according to Circona. The toy category experienced this pressure from a POS perspective in Q1. Total toy industry sales increased 2.8% globally, while average selling prices declined 1.9% per survey. It's important to note that the increase in POS is in large part due to the timing of Easter, which fell in Q1 in 2024 compared to Q2 last year. Additionally, much of the growth in total toy POS was driven by one category, Construction and Building Sets, a category in which we do not participate.
Max Rangel: The toy category experienced this pressure from a Pos perspective in Q1.
Max Rangel: Toy industry sales increased two 8% globally.
Max Rangel: Average selling prices declined one 9% Berkshire County.
Max Rangel: It's important to note that the increase in POS is in large part due to the timing of Easter which fell in Q1 in 2024.
Max Rangel: Compared to Q2 last year. Additionally.
Max Rangel: Additionally, much of the growth in total in toy Pos was driven by one category.
Max Rangel: Construction and building sets a category in which we do not participate.
Max Rangel: According to Circana, our global Q1 POS increased 21%, including Melissa and Doug. However, excluding Melissa and Doug, our global Q1 POS declined 3%. Our U.S. was up 28% with Melissa and Doug and down 4% excluding Melissa and Doug. We grew market share in six of the 11 global markets tried by Cercana, including France, Germany, Italy, Mexico, the Netherlands, and Spain. We grew share in four of 11 Cercana product supercategories, including arts and craft, youth electronics, plush, and vehicles, and maintained our share in games and puzzles. However, global and U.S. POS for the infant, toddler, and preschool category in Q1 was down 3 and 4 percent, respectively, per Cercana. Spin Master's POS in Q1 was down in line with the category.
Max Rangel: According to <unk>, our global Q1, Pos increased 21%, including Melissa and Doug.
Max Rangel: Excluding <unk>, our global Q1, Pos declined 3%.
Max Rangel: Our U S was up 28% with Melissa, Doug and down 4%, excluding Melissa Doug.
Max Rangel: We grew market share in six of the 11 global market strike better economy.
Max Rangel: Including France, Germany, Italy, Mexico, the Netherlands, and Spain.
Max Rangel: We grew share in four of 11 or kind of product super categories, including Arts, and Crafts youth electronics, plush and vehicles and maintain our share in games and puzzles.
Max Rangel: Global and U S.
Max Rangel: Pos for the infant toddler and preschool category in Q1 was down three and 4% respectively for sure Connor.
Max Rangel: Spin master's Pos in Q1 was down in line with the category.
Max Rangel: With the acquisition of Melissa and Doug, we became the number one manufacturer in the infant, toddler, and preschool category in Q1 globally. Spin Master had 4 of the top 10 items in the U.S. preschool toy segment in Q1 per Shurikana, including the number 1 item, the Paw Patrol Jungle Pups Vehicle Assortment, demonstrating our commitment to innovation. Globally, PAW Patrol POS declined by 3.7%, and in the U.S., 5.5%. International POS for PAW Patrol declined by 1.5%.
Max Rangel: With the acquisition of Melissa Doug we became the number one manufacturer in the infant toddler and preschool category in Q1 globally.
Max Rangel: <unk> had four of the top 10 items in the U S. Preschool toy segment in Q1 versus your content, including the number one item the paw patrol jungle pumps vehicle assortment.
Max Rangel: Demonstrating our commitment to innovation.
Max Rangel: Globally.
Max Rangel: Paw patrol Pos declined by three 7% and in the U S five 5%.
Max Rangel: International Pos for Paw patrol declined at one 5%.
Max Rangel: Gabby's Dollhouse was the number 9 property globally in the infant-toddler preschool category in Q1. Bursar Cana and International POS were up 44%. Universal DreamWorks Animation just announced plans for the first feature film for Gabby's Dollhouse, set to debut in September 2025. The TV series has been among the top 10 most watched shows on Netflix in 57 countries. We're further expanding our preschool portfolio later in 2024 and into 25. Our licensed toy line with YouTube sensation Miss Rachel is set to launch in the fall.
Max Rangel: <unk> Dollhouse was the number nine property globally in the infant toddler preschool category in Q1 <unk>.
Max Rangel: Mercer County, and International Pos was up 44%.
Max Rangel: Universal Dreamworks animation, just announced plans for the first feature film for GAAP as Dalhouse set to debut September 2025.
Max Rangel: The TV series has been among the top 10, most watched shows on Netflix in 57 countries.
Max Rangel: We're further expanding our preschool portfolio later in 2024, 1% to 25 are licensed storyline with Youtube sensation Ms. Rachel.
Max Rangel: You set to launch in the fall Ms. Rachel has an uncanny ability to connect with babies children and parents.
Max Rangel: Miss Rachel has an uncanny ability to connect with babies, children, and parents, and retailers are eagerly awaiting our new toy line. Our design teams, both from Spin Master and Melissa and Doug, have been working closely with Rachel to deliver hands-on play for her avid fan base of 50 million unique monthly viewers. We are strategically positioned as a leader in preschool and have further deepened our presence in this important toy category with our acquisition of Melissa and Doug.
Max Rangel: And retailers are eagerly awaiting our new toy line.
Max Rangel: Our design teams both from three Master and Melissa Doug have been working closely with Rachel to deliver handsome play for avid fan base of 50 million unique monthly viewers.
Max Rangel: We are strategically positioned as a leader in preschool and further deepen our presence in this important toy category with our acquisition of Melissa Doug the integration of <unk> well underway and.
Max Rangel: The integration of Melissa and Doug is well underway, and we are focused on revenue and cost synergy opportunities. With the trust of multiple generations of parents, coupled with a leading e-commerce platform, we believe Melissa & Doug has strong potential for global growth. MND POS in the U.S. was down in Q1 slightly more than the category average, but improved sequentially in Q1 to finish in line with the category.
Max Rangel: And we are focused on revenue and cost synergy opportunities with the trust of multiple generations of parents, coupled with a leading E. Commerce platform. We believe Melissa Doug has strong potential for our global growth.
Max Rangel: <unk> Pos in the U S was down in Q1 slightly more than the category average, but improved sequentially in Q1 to finish in line with the category.
Max Rangel: During Easter, we saw Melissa and Doug Pio's performance ahead of the industry. We are launching some exciting innovation at Melissa and Doug this fall. StickerWOW offers a new way to play with stickers through collectible and refillable sticker stampers, which help build fine motor and problem-solving skills, as well as drive creativity and character play.
Max Rangel: During Easter we saw Melissa Doug Pos performance ahead of the industry.
Max Rangel: We are launching some exciting innovation at Melissa Doug This fall sticker, while offers a new way to play with stickers through collectible and refillable sticker, Stenfors, which help build fine motor and problem solving skills as well as drive creativity and character play sticky.
Max Rangel: Sticker WOW launched in 2023 and made your Kanna's list of the top 10 new items in Q1. More exciting innovation arrives in the fall with the new Easy Fold Play Gym and the innovative Blockables line, a wood-based construction toy for young kids that is positioned in the construction building set category. In DOLCE & INTERACTIVE, we have a host of new introductions leading into the fall. There is big excitement at retail about our latest innovation for Hatchimals, which some of you were able to see in our L.A. showroom in January.
Max Rangel: Sticker, while launching 2023 and <unk> list of top 10, new items in Q1.
Max Rangel: More exciting innovation are rising in the fall with the new EC fold play Jim and the innovative Blockable sign a wood based construction toy for young kids that his position in the construction building sets category.
Max Rangel: In Dawson and interactive we have a host of new introductions, leading into the fall.
Max Rangel: There is big excitement at retail about our latest innovation for <unk>, which some of you were able to see in our showroom in January we're working with our retail partners to launches newest iteration on October 4th.
Max Rangel: We're working with our retail partners to launch its newest iteration on October 4th, which we have declared Hatchimals Day. The toy line for our Netflix original series, Unicorn Academy, will hit shelves this fall. The collection includes fashion dolls, unicorns, and plush, which mirror the diversity and magic of the characters from the series.
Max Rangel: Which we have declared <unk> date.
Max Rangel: The toy line for our Netflix original series Unicorn Academy will hit shelves. This fall the <unk>.
Max Rangel: Collection includes fashion, those unicorns, and plush, which mirrored the diversity and magic of the characters from the series.
Max Rangel: We have regularly proven our ability to introduce new breakthrough items in TOI. Last year, BITSI was an innovative success story that allowed us to gain six and a half SharePoints in the youth electronics category per Shurkana. We are now introducing two new iterations of Bitsy this summer, including a Magicals Bitsy and a Disney Bitsy, featuring some of the most iconic characters from Disney's extensive library.
Max Rangel: We have regularly proven our ability to introduce new breakthrough items in toy last year <unk> was an innovative success story that allow us to gain six and a half share points in the use of electronics category for Chicago.
Max Rangel: We are now introducing two new iterations of bitchy summer, including a magical bitsy and a Disney beauty featuring some of the most iconic characters from the <unk> extensive library.
Max Rangel: One of the key highlights from a POS perspective is Monster Jam, which is off to a stellar start in 2024 with POS up 32%. The winning combination of live-action shows combined with real-to-life toys across a wide range of price points has helped catapult retail sales. We have more in store for the fall, with a new line of Marvel Monster Trucks featuring popular superheroes, including Spider-Man, new RC vehicles, and play sets all geared to bring the action of the arena into the home.
Max Rangel: One of the Q1 highlights from a Pos perspective as Monster Jam put yourself is off to a stellar start in 2020 for it with 32%.
Max Rangel: The winning combination of live action shows combined with real to life toys across a wide range of price points has helped catapult retail sales.
Max Rangel: We have more in store for the fall with our new lineup Marvel Monster trucks, featuring popular superheroes, including Spider Man, New RC vehicles in place, it's all geared to bring the action of the arena into the home.
Max Rangel: Within games and puzzles, plans for Rubik's 50th anniversary are ramping up, and the brand is showing no signs of slowing down. The Rubik's Cube has become an integral part of pop culture, influencing art, design, math, and science, as well as enthralling millions of people with the goal of solving it.
Max Rangel: Within games and puzzles plans for Rubik's, 50th anniversary are ramping up and the brand is showing no signs of slowing down.
Max Rangel: <unk> has become an integral part of pop culture, influencing art designed math and science as well as enthralling millions of people with the goal of solving the cube.
Max Rangel: Our goal this year is to inspire the next generation of Cube solvers with our Make Your Move global campaign. To celebrate the anniversary, we have many new product launches and over 25 collaborations celebrating our iconic status, some of which were introduced in Q1. According to Circana, this helped drive our Q1 POS up 16%. I want to briefly address retail price points.
Max Rangel: Our goal this year is to inspire day next generation of <unk> with our major move global campaign to celebrate the anniversary we have many new product launches and over 25 collaborations celebrating our iconic status some of which were introduced in Q1. According to serve Kona. This helped drive our Q1 Pos up <unk>.
Max Rangel: 16%.
Max Rangel: I want to briefly address retail price points.
Max Rangel: We have adjusted our toy portfolio pricing to lower the average price point by 9% for 2024. Additionally, we have invested in increasing our product offering tailored to the value channel, which will launch in H2. Looking forward for the balance of 24 and into 25, our focus in toy is building on the 23 base. Our top retailers in the U.S., over the last month, have begun to express cautious optimism for the second half. We've also recently had a positive response to our Spring 2025 line preview, with encouraging commentary on a multitude of our brands across vehicles, games, and preschool. 2025 is shaping up well.
Max Rangel: We have adjusted our toy portfolio pricing two lowered the average price point by 9% for 2024 importantly, we have invested in increasing our product offering.
Max Rangel: Taylor to the value channel, which will launch in H two.
Max Rangel: Looking forward for the balance of 24 to 25, our focus in toy is building on the 23 base.
Max Rangel: Our top retailers in the U S over the last month have begun to express cautious.
Max Rangel: Cautious optimism for the second half.
Max Rangel: We've also recently had a positive response to our spring 2025 line preview with encouraging commentary.
Max Rangel: On a multitude of our brands across vehicles games and preschool.
Max Rangel: 2025 is shaping up well.
Max Rangel: Turning to entertainment, revenue increased by 16.5%. Total gross viewing minutes for Paul Universe for kids ages 2 to 5 were up 63% in Q1. With more kids viewing content on YouTube, we have developed a strategic alliance with Moonbug Entertainment to create complementary pod content for the platform, which is deepening our engagement with preschoolers. The first shorts debuted last weekend and have already exceeded our historical view time for new content on our channels in just a few days.
Max Rangel: Turning to entertainment or revenue increased by 16, 5% total gross viewing minutes, where Paul Universe, where kids ages two to five were up 63% in Q1.
Max Rangel: With markets viewing content on Youtube, we have developed a strategic alliance with Moon book Entertainment to create complementary Paul content for the platform, which is deepening our engagement with preschoolers.
Max Rangel: The first shorts debuted last weekend and have already exceeded our historical view time for new content on our channels in just a few days.
Max Rangel: With production on our 11th season underway, we are also working on the third post-feature film set to hit theaters in July 2026. We are in production on Rubble and Crew Season 2 and have Greenlit Season 3.
Max Rangel: With production on our 11th season underway. We are also working on the third plus feature film set to hit theaters in July 2026.
Max Rangel: We are in production of rubble in cruise season, two and half Greenlee <unk> III. We are seeing some early success in Europe with both the series and the toy line.
Max Rangel: We are seeing some early success in Europe with both the series and the toyline. Unicorn Academy, our fantasy adventure animated series, launched on Netflix last November and quickly earned its place as the number one kids show globally for the opening weekend. The brand has retained its awareness, and the show is performing well, measuring 51 million gross viewing minutes in Q1. We are excited to share that the new content will drop on Netflix this summer in advance of the toy launch in the fall.
Max Rangel: Unicorn Academy, our fantasy adventure animated series launching Netflix last November and quickly earn its place as the number one kids show globally for the opening weekend.
Max Rangel: The brand has retained its awareness and the show is performing well measuring $51 million gross viewing minutes in Q1.
Max Rangel: We are excited to share that the new content will drop on Netflix do summer in advance of the toy launch in the fall.
Max Rangel: The musicality of the series lends itself to further distribution and promotional opportunities for the franchise. And we are partnering with Kitzbop for their summer concert series, which will integrate Unicorn Academy original songs into the show. Our licensing and merchandising programs that extend the branding to adjacent consumer product categories are building momentum with partnerships across stationery, fashion, personal care, and publishing. Our newest animated preschool series, Vida the Vet, continues to build an audience and momentum.
Max Rangel: The musicality of the series lends itself to further distribution and promotional opportunities for the franchise and we are partnering with kids Bob for their summer concert series, which will integrate Unicorn Academy original songs into the show.
Max Rangel: Our licensing and merchandising programs that extend the brand into adjacent consumer product categories are building momentum with partnerships across stationary fashion personal care and polishing.
Max Rangel: Our newest animated preschool series Vida, the vet continues to build audience and momentum and by summer. We will have launched beta with a premium broadcasters in over 20 countries similar to Bob we are partnering with Moonwalk entertainment to create complementary short form content for Youtube, giving preschoolers to opportunity to delve deeper into <unk>.
Max Rangel: And by summer, we will have launched Vida with premium broadcasters in over 20 countries. Similar to Pub, we are partnering with Moon Book Entertainment to create complimentary short form content for YouTube, giving preschoolers the opportunity to delve deeper into Vida's world. We have also greenlit a second season for distribution in 2025.
Max Rangel: <unk> World. We are also Greenlit, a second see some for distribution in 2025.
Max Rangel: Turning to our Digital Games Creative Center, our subscription business is a key focus and continues to grow. At the end of Q1, we had 430,000 subscribers, an 8% increase from 399,000 in December. Of the 430,000 subscribers, PICNIC and SEGOMINI comprise 374,000 in PAW Patrol Academy.
Max Rangel: Turning to our digital games Creative center, our subscription business is a key focus and continues to grow at the end of Q1, we had 430000 subscribers up 8% from 399000 in December.
Max Rangel: 430000 subscribers picnic and sago mini comprise 70.
Max Rangel: 74000, and Paw Patrol Academy.
Max Rangel: 56000.
Max Rangel: We are continuing to add content to the Picnic Bundle, and in late May, Math Tango from Originator Studios will be launched. More content drives higher consumer value, and we are seeing higher monthly recurring revenue, as well as a significant increase in cross-installs from parents who see value in the bundle compared to standalone apps. We are pleased with the growth in Paw Patrol Academy subscribers, which have climbed 63% since December. However, monthly active users were down 4.3% in Talk Alive World, but downloads continue to increase, showing higher consumer engagement.
Max Rangel: We are continuing to add content into picnic bump to the picnic bundle and in late May math Tango from originators studios will be launch more.
Max Rangel: More content drives higher consumer value and we are seeing higher monthly recurring revenue as well as a significant increase in cross installs.
Max Rangel: From parents, who see value in the bundle compared to Standalone apps. We are pleased with the growth in Paw patrol Academy subscribers, which have climbed 63% since December.
Max Rangel: Monthly active users were down four 3% in total I've world or downloads continue to increase showing higher consumer engagement.
Max Rangel: We are investing in a mix of initiatives, including more content. And for the second half, we will be introducing exciting new features into the game. Last year, we initiated co-branded digital items within Toka Live World with Hello Kitty, followed later by SpongeBob SquarePants. These collabs tap into the brands that resonate within our player audience and drive revenue as fans purchase items to further customize their worlds within the game. We re-released the Hello Kitty Furniture Pack in January and drove over $900,000 in revenue in 7 days.
Max Rangel: We are investing in mix of initiatives, including more content.
Max Rangel: For the second half, we will be introducing exciting new features into the game.
Max Rangel: Last year, we initiated co branded digital items within Tylka life World with Hello, Kitty followed later by Spongebob Squarepants. This colab stopping to the brands that resonate within our player audience and drive revenue and as fans purchase items to further customize their worlds within the game.
Max Rangel: We released the Hello, Kitty furniture parking January and drove over 900000 revenue in seven days. This summer we will release, our first ever music cold up within the game with our global team focused superstar, which is on trend for our audience, who love to Bermuda with their stories.
Max Rangel: This summer, we will release our first ever music collab within the game with a global teen-focused superstar, which is on trend for our audience who love to pair music with their stories. We are looking forward to the launch of Toca Boca Days, our first social multiplayer game that will expand the player base of the Toca universe. Toca Boca Days represents a significant evolution for the brand and broadens the core Toca Boca experience with multiplayer capabilities, enabling players to safely create, interact, and collaborate in an imaginative setting. DACE is now live in Australia and New Zealand, and we are seeing healthy organic installs, further demonstrating the strength of the brand.
Max Rangel: We are looking forward to the launch of Toco Boca days, our first social multiplayer game that will expand the player base of the toga universe.
Max Rangel: Toco Boca days represents a significant evolution for the brand and broadens the court toco Boca experience with multiplayer capabilities, enabling players to safely create interact and collaborate in an imaginary setting.
Max Rangel: This is now live in Australia, and New Zealand, and we are seeing healthy organic installs further demonstrating the strength of the brand.
Max Rangel: In the coming months, we plan to release days in Canada, Sweden, and the UK, as well as Germany, scaling to global markets in the fall. Our team in Stockholm is also focusing on Rubik's Match, our new digital game that will leverage the global awareness of the cube and entice casual mobile gamers with a fresh take on the match three game genre. Our latest soft launch data shows strong retention and app stability data, and Rubik's Match is on track to release globally at the end of June to coincide with Rubik's 50th anniversary. In 2025, we will release our mobile digital game for Unicorn Academy, filled with action and adventure that brings the magic and allure of Unicorn Island into the digital world.
Max Rangel: In the coming months, we plan to release days in Canada, Sweden, and the U K as well as Germany scaling to global markets in the fall.
Max Rangel: Our team in Stockholm. He is also focusing on Rubik's match, our new digital game that will leverage the global awareness of the cube and entice casual mobile gamers with a fresh take on the match three game genre.
Max Rangel: Our latest soft launch data shows strong retention and app stability data and rubik's matches on track to release globally at the end of June to coincide with a rubik's 50th anniversary.
Max Rangel: In 2025, we will release, our mobile digital game for Unicorn Academy filled with action and adventure that brings the magic and allure of Unicorn Island into the digital World.
Max Rangel: I was recently in Stockholm and was able to see progress on the game's development and ETH is out of this world. Our primary focus is to continue to drive growth across all three Creative Centers, with a particular emphasis on ensuring that we integrate and achieve our growth goals for Melissa and Doug. Given the challenging economic environment we find ourselves operating in, we are also focused on driving operational efficiencies in every area of the business.
Max Rangel: It was recently installed com and was able to see progress on the games developments and ease out of this world.
Max Rangel: Our primary focus is to continue to drive growth across all three creative centers with a particular emphasis on ensuring that we integrate and achieve our growth goals for Melissa Doug.
Max Rangel: Given the challenging economic environment, we find ourselves operating in we are also focused on driving operational efficiencies in every area of the business.
Max Rangel: Our financial framework is solid, we have a robust pipeline of innovation, and we are evolving our offering and marketing plans to ensure our brands remain relevant and resonate with consumers. Finally, we continue to strengthen our enterprise capabilities to drive long-term growth and value for our shareholders. With that, I will now turn it over to Mark.
Max Rangel: Our financial framework is solid we have a robust pipeline of innovation and we are evolving our offering and marketing plans to ensure our brands remain relevant and resonate with consumers.
Max Rangel: Finally, we continue to strengthen our enterprise capabilities to drive long term growth and value for our shareholders with that I will now turn it over to Mark.
Mark L. Segal: Thank you, Max, and good morning. We delivered $316.2 million in revenue across all three Creative Centers, up 16.5% from 2023, and including $40.4 million in revenue from Melissa & Doug. We delivered $18.6 million in adjusted EBITDA, an expected decline compared to last year because of the increased proportion of revenue contributed from the Toy Creative Center, the Melissa & Doug acquisition, and the associated seasonality and profitability arising from the acquisition. Excluding Melissa & Doug, adjusted EBITDA was $27.8 million, slightly lower than last year. It's important to remember that Q1 is our seasonally lowest quarter from a toy revenue perspective, typically representing between 10 and 15 percent of revenue, and this has an impact on operating leverage and profitability.
Mark: Thank you Max and good morning.
Mark L. Segal: We delivered $316 2 million in revenue across all three creative centers up 16, 5% from 2023, and including $44 million of revenue from Melissa Doug.
Mark L. Segal: We delivered $18 6 million in adjusted EBITDA and expected decline compared to last year because of the increased proportion of revenue contributed from the toy Creative center, the Melissa Doug acquisition, and the associated seasonality and profitability arising from the acquisition.
Mark L. Segal: Excluding Melissa Doug adjusted EBITDA was $27 8 million slightly lower than last year.
Mark L. Segal: It is important to remember that Q1 is our seasonally lowest quarter from a toy revenue perspective.
Mark L. Segal: The key representing between 10 and 15% of revenue and this has an impact on operating leverage and profitability.
Mark L. Segal: Q1 Gross Profit decreased by $2 million to $156.5 million, and Gross Margin declined to 49.5% from 58.4%, primarily due to toys and digital games, partially offset by entertainment. It is important to note that as a part of the acquisition of Melissa & Doug, we acquired $179.6 million of inventory, of which $66.3 million relates to a fair market value step-up adjustment, representing the difference between inventory cost and its realizable value This fair value adjustment is recognized as an expense in the cost of sales as the inventory is sold.
Mark L. Segal: Q1, gross profit decreased by 2 million to $156 5 million and gross margin declined to 49, 5% from 58, 4%, primarily due to choice and digital games, partially offset by entertainment.
Mark L. Segal: In Q1, $20.6 million of the Inventory Fair Market Value Adjustment was recognized in toy cost of sales. As a result... We have introduced a new metric, Adjusted Gross Profit, to exclude the effect of the fair value adjustment and which is more reflective of true operating performance. Adjusted gross profit increased by $18.6 million to $177.1 million. Adjusted Gross Margin was 56% compared to 58.4%, down 240 basis points, mainly due to market and customer mix and higher sales allowances. Excluding the Fair Value Adjustment, the contribution of Melissa and Doug was accretive to Toy Grass Margin. Let me spend a few minutes on each creative center's financial performance.
Mark L. Segal: It is important to note that as a part of the acquisition of Melissa Doug We acquired $179 $6 million of inventory of which $66 3 million relates to a fair market value step up adjustments.
Mark L. Segal: Representing the difference between inventory cost and its realizable value.
Mark L. Segal: This fair value adjustment is recognized as an expense in cost of sales as the inventory is sold in.
Mark L. Segal: In Q1 $26 million of the inventory fair market value adjustment was recognized in toy cost of sales.
Mark L. Segal: As a result.
Mark L. Segal: We have introduced a new metric adjusted gross profit to exclude the effect of the fair value adjustment and which is more reflective of true operating performance.
Mark L. Segal: Adjusted gross profit increased by $18 6 million to $177 1 million <unk>.
Mark L. Segal: Adjusted gross margin was 56% compared to 58, 4% down 240 basis points, mainly due to market and customer mix and higher sales allowances.
Mark L. Segal: Excluding the fair value adjustments the contribution of Melissa Doug was accretive to toy gross margin.
Mark L. Segal: Let me spend a few minutes on each creative St as financial performance.
Mark L. Segal: Toy Gro's product sales in Q1 were up 22.1%, including Melissa & Doug, and were up 50 basis points without Melissa & Doug. As a reminder, with the acquisition of Melissa & Doug, we've adjusted our 2024 toy product categories into Preschool, Infants, and Toddler, and Plush, which includes Melissa & Doug. Activities, Games, and Puzzles, and Dolls in Interactive, Wheels in Action, and Outdoor.
Mark L. Segal: Toy gross product sales in Q1 were up 22, 1%, including Millicent, Doug and we're up 50 basis points without Melissa duck.
Mark L. Segal: As a reminder, with the acquisition of Millicent, Doug We've adjusted our 2024 toy product categories into preschool infant and toddler in plush, which includes Melissa Doug.
Mark L. Segal: Activities games <unk> puzzles indulge in interactive.
Mark L. Segal: Wilson action and outdoor.
Mark L. Segal: Preschool Infant and Toddler in Plush led growth in Q1, up 40.2 million, or 48.7%, driven by Melissa & Doug, Paw Patrol, and GUN. Activities, Games, and Puzzles, and Dolls in Interactive grew 17.9 million, or 28.6 percent, led by Bitsy, Kinetic Sand, and the Games and Puzzles Portfolio. Wheels in Action declined $3 million, or 6.9%, and Outdoor was down $7.3
Mark L. Segal: Preschool infant toddler in plush led growth in Q1 up $40 2 million or <unk> 48, 7% driven by Melissa Doug pulp patrol and guns.
Mark L. Segal: Activities games <unk> puzzles, indulgent interactive grew $17 9 million or 28, 6% led by Betsy kinetic sand and the games and puzzles portfolio.
Mark L. Segal: Wilson action declined $3 million or six 9% and outdoor was down $7 $3 million.
Mark L. Segal: Geographically, gross product sales growth was driven by North America with the inclusion of Melissa and Doug, who currently generate most of their sales in the U.S. Sales allowances in Q1 were 14.5% of toy gross product sales, compared to 13.9%, slightly elevated from geographic market mix factors and greater promotional activity outside of the U.S. Adjusted EBITDA in Q1 for TOI was a loss of $32.5 million, or negative 14.4%, compared to negative 11.5%.
Mark L. Segal: Geographically gross product sales growth was driven by North America with the inclusion of Melissa Doug who currently generate most of their sales in the U S.
Mark L. Segal: Sales allowances in Q1 with 14.5% of toy gross product sales compared to 13, 9% slightly elevated from geographic market mix factors and greater promotional activity outside of the U S.
Mark L. Segal: Adjusted EBITDA in Q1 for toy was a loss of $32 5 million or negative 14, 4% compared to negative 11, 5%.
Mark L. Segal: The decrease in adjusted EBITDA margin was from lower gross margin and higher SG&A from the inclusion of Melissa and Doug, which reduced operating leverage. Given the seasonal weighting towards the second half that M&D has relative to Spin Master, Melissa & Doug revenue is typically 20% H1, 80% H2, compared to 30% and 70% for Spin Master. This deleveraging was partially reduced by lower selling expenses relative to toy revenue due to the lower proportion of Melissa and Doug's sales from licensed brands.
Mark L. Segal: The decrease in adjusted EBITDA margin was from lower gross margin and higher SG&A from the inclusion of Melissa, Doug, which reduced operating leverage given the seasonal weighting towards the second half that M. N D has relative to spin master.
Mark L. Segal: Melissa Doug revenue is typically 20% H, 180%, H, two compared to 30% and 70% for spin Master.
Mark L. Segal: This deleveraging was partially reduced by lower selling expenses relative to toy revenue due to the low proportion of Melissa <unk> sales from licensed brands.
Mark L. Segal: In Q1, entertainment revenue increased by 6.2 million, or 16.5%, driven by higher revenue from the distribution of the Paw Patrol series and movies. Although revenue increased, Adjusted Operating Income decreased slightly to $29.1 million from $29.9 million and Adjusted Operating Margin to 66.4% from 79.5%. The margin decline was due to mix, with a higher proportion of lower margin distribution revenue compared to higher margin licensing and merchandising revenue. Digital Games revenue declined slightly by $1.5 million, or 3.2%, to $46 million, primarily due to lower in-game purchases in Toker Life World, offset in part by higher subscription revenue for Picnic and Paw Patrol Academy. In Tokolife World, we saw a slight softening in short-term retention, which led to lower spend conversion, but revenue per player increased.
Mark L. Segal: In Q1 entertainment revenue increased by $6 2 million or 16, 5% driven by higher revenue from the distribution of the pulp patrol series and movie.
Mark L. Segal: Although revenue increased adjusted operating income decreased slightly to $29 1 million from $29 9 million and adjusted operating margin to 66, 4% from 79, 5% the.
Mark L. Segal: The margin decline was due to mix with a higher proportion of lower margin distribution revenue compared to higher margin licensing and merchandising revenue.
Mark L. Segal: Okay.
Mark L. Segal: Digital games revenue declined slightly by $1.5 million or three 2% to $46 million, primarily due to lower in game purchases and Tokio life World offset impart by higher subscription revenue for picnic and pulp called Academy.
Mark L. Segal: In telco life World, we saw a slight softening in short term retention, which has led to lowest spend conversion, but revenue per player increased.
Mark L. Segal: We have actions underway to ensure we can better capitalize on continued strong player acquisition, as Max described. Digital Games' adjusted operating margin was 33% from 40% due to a slight decline in revenue and higher marketing costs for Paw Patrol Academy and Pikmin. Turning back to consolidated results, adjusted SG&A increased by 34.1 million, or 24.4%, to 173.6 million and as a percentage of revenue from 54.9% to 51.4%, primarily driven by the inclusion of Melissa and Doug, which resulted in deleveraging as I described earlier.
Mark L. Segal: We have actions underway to ensure we can better capitalize on continued strong player acquisition as <unk> described.
Mark L. Segal: Yeah.
Mark L. Segal: Digital games adjusted operating margin was 33% from 40% from the slight decline in revenue and higher marketing costs for pulp patrol Academy and picnic.
Mark L. Segal: Turning back to consolidated results adjusted SG&A increased by $34 1 million or 24, 4% to $173 6 million and as a percentage of revenue from 54, 9%.
Mark L. Segal: From 51, 4%, primarily driven by the inclusion of Melissa Doug which resulted in deleveraging as I described earlier.
Mark L. Segal: Consolidated Adjusted EBITDA for Q1 was $18.6 million compared to $30.6 million; adjusted even the margin was 5.9% compared to 11.3%. The decrease in adjusted EBITDA was primarily from the toy segment due to the inclusion of Melissa and Doug, which had a standalone adjusted EBITDA loss of $9.2 million and digital games, partially offset by an increase in entertainment. Adjusted EBITDA excluding Melissa and Doug was $27.8 million compared to $30.6 million, a decrease of $2.8 million. Adjusted EBITDA margin, excluding Melissa and Doug, decreased slightly to 10.1% compared to 11.3%.
Mark L. Segal: Consolidated adjusted EBITDA for Q1 was $18 6 million compared to $36 million adjusted EBITDA margin was five 9% compared to 11, 3%.
Mark L. Segal: The decrease in adjusted EBITDA was primarily from the toy segment due to the inclusion of Melissa Doug.
Mark L. Segal: Which had a standalone adjusted EBITDA loss of $9 2 million and digital games, partially offset by an increase in entertainment.
Mark L. Segal: Adjusted EBITDA, excluding Melissa Doug was $27 8 million compared to $30 6 million a decrease of $2 8 million adjusted.
Mark L. Segal: Adjusted EBITDA margin, excluding Melissa Doug decreased slightly to 10, 1% compared to 11, 3%.
Mark L. Segal: Hi.
Mark L. Segal: Looking at our balance sheet, inventory at the end of Q1 was well above our historical levels due to Melissa and Doug's inventory. We expect Millicent Doug's inventory to be significantly lower by the end of 2024 as we flush the fair market value step-up adjustment through the P&L and refine their purchasing patterns. Re-cash flow in Q1 was negative $600,000 compared to negative $34.4 million, an increase of $33.8 million due to cash generated from working capital reductions.
Mark L. Segal: Looking at our balance sheet inventory at the end of Q1 was well above our historical levels due to Melissa Doug's inventory.
Mark L. Segal: We expect Melissa Doug inventory to be significantly lower by the end of 2024, as we flushed the fair market value step up adjustment through the P&L and refined the purchasing patterns.
Mark L. Segal: Free cash flow in Q1 was negative $600000.
Mark L. Segal: Compared to negative $34 4 million, an increase of $33 8 million due to cash generated from working capital reductions.
Mark L. Segal: We ended Q1 with $205.5 million in cash. As part of the Melissa and Doug transaction, we raised debt financing of $525 million, of which $50 million was repaid in Q1. The combined cash balance and unused credit facility gives us $464 million of available liquidity.
Mark L. Segal: We ended Q1 with $205 5 million in cash.
Mark L. Segal: As part of the Melissa Doug transaction, we raised debt financing of $525 million of which 50 million was repaid in Q1.
Mark L. Segal: The combined cash balance and unused credit facility gives us $464 million of available liquidity.
Mark L. Segal: From a capital allocation perspective, we will continue to focus on investments in innovation content, and M&A as well as share buybacks dividends and debt reduction.
Mark L. Segal: From a capital allocation perspective, we will continue to focus on investments in innovation, content, and M&A, as well as share buybacks, dividends, and debt reduction. Regarding M&A, we will focus on integrating Melissa and Doug, and M&A activity in 2024 will be focused on digital games, entertainment, and ventures. Following the approval of our NCIB for just over 2.94 million shares on March 4, we've repurchased almost 600,000 shares to date, at a cost of just under $15 million, of which roughly 333,000 shares were repurchased in Q1 and the balance since.
Mark L. Segal: Regarding M&A, we will focus on integrating Melissa Doug and M&A activity in 2024 will be focused on digital games.
Mark L. Segal: Entertainment and ventures.
Mark L. Segal: Following the approval of <unk> in CIB for just over 2.94 million shares on March four we've repurchased almost 600000 shares to date.
Mark L. Segal: At a cost of just under $15 million of which roughly 333000 shares were repurchased in Q1 and the balance since.
Mark L. Segal: Looking ahead, we are committed to the share buyback program and we'll continue to execute opportunistically.
Mark L. Segal: Looking ahead, we are committed to the share buyback program and will continue to execute opportunistically. We believe that the NCIB represents a prudent use of our capital and is an attractive investment given our low multiple strokes.
Mark L. Segal: We believe that the NCI be represents a prudent use of our capital and is an attractive investment given our low multiple.
Speaker Change: Excuse me.
Mark L. Segal: We are also pleased to announce that we've raised our quarterly dividend by 100% from $0.06 per share to $0.12 per share. The decision to initiate a higher dividend reflects confidence in our performance and, together with the NCIB, reflects our commitment to drive shareholder value while maintaining a strong balance sheet for future growth. Since 2022, we've returned approximately $53 million directly to shareholders through share buybacks and dividends.
Mark L. Segal: Strong financial position and exciting prospects.
Mark L. Segal: We're also pleased to announce that we've raised our quarterly dividend by 100% from six cents per share to <unk> 12 cents per share.
Mark L. Segal: The decision to initiate a higher dividend reflects confidence in our performance and together with the NCI be reflects our commitment to drive shareholder value, while maintaining a strong balance sheet for future growth.
Mark L. Segal: Since 2022, we've returned approximately $53 million directly to shareholders through share buybacks and dividends.
Mark L. Segal: Turning to our 2024 outlook, we are maintaining the four-year guidance given in March. As we mentioned in March, we expect the toy industry to face macroeconomic headwinds, causing reduced consumer discretionary spending. We have an innovative, deep, and value-focused toy line. However, this is tempered by the reality that consumer behavior in 2024 is likely to continue to be pressured.
Mark L. Segal: Turning to our 2024 outlook, we are maintaining the full year guidance given in March.
Mark L. Segal: As we mentioned in March we expect the toy industry to face macroeconomic headwinds, causing reduced consumer discretionary spending.
Mark L. Segal: We have an innovative deep and value focused toy line. However, this is tempered by the reality that consumer behavior in 2024 is likely to continue to be pressured.
Mark L. Segal: For that reason, we are maintaining our previous guidance, which is that, excluding Melissa and Doug, we expect 2024 toy gross product sales to be in line with 2023 and seasonality to be 28% to 32% in H1. Total revenue growth is also expected to be in line with 2023, with lower revenue from entertainment offset by higher digital games revenue. We continue to expect sales allowances to be approximately 13% of gross product sales, higher than our typical range, mostly due to market and customer mix. We expect marketing costs to be between 9% and 10% of revenue.
Mark L. Segal: For that reason, we are maintaining our previous guidance, which is that excluding Melissa Doug. We expect 2024 toy gross product sales to be in line with 2023 and seasonality to be 28% to 32% in H one.
Mark L. Segal: Total revenue growth, excluding Melissa Doug. He is also expected to be in line with 2023 with lower revenue from entertainment offset by higher digital games revenue.
Mark L. Segal: We continue to expect sales allowances to be approximately 13% of gross product sales higher than our typical range, mostly due to market and customer mix.
Mark L. Segal: We expect marketing cost to be between nine and 10% of revenue.
Mark L. Segal: We continue to expect Adjusted Eve at the Margins to be in line with 2023, excluding Melissa and Doug. Our key focus in 2024 is the integration and realization of cost synergies and growth opportunities for Melissa and Doug. Our teams are working hard on integration activities and are focused on building a platform for revenue growth, international growth, and cost synergies. We continue to expect Melissa and Doug gross product sales of between $420 and $430 million with revenue of $370 to $375 million. As a reminder, Melissa & Doug generates about 80% of its revenue in the second half, and as illustrated in Q1, this impacts the cadence of operating leverage and quarterly profitability.
Mark L. Segal: We expect we continue to expect adjusted EBITDA margins to be in line with 2023, excluding Melissa Doug.
Mark L. Segal: Our key focus in 2020 full is the integration and realization of cost synergies and growth opportunities for Melissa Doug. Our teams are working hard on integration activities and our focus on building a platform for revenue growth international growth and cost synergies with.
Mark L. Segal: We continue to expect Melissa <unk> gross product sales of between 420 and $430 million with revenue of 370 to 375 billion.
Mark L. Segal: As a reminder.
Mark L. Segal: Linda.
Mark L. Segal: <unk> generates about 80% of its revenue in the second half and as and as illustrated in Q1. This impacts the cadence of operating leverage and coffee profitability.
Mark L. Segal: For 2024, we continue to expect Melissa and Doug's adjusted EBITDA margins to be approximately 19.5%. The consistent cash flow we've generated gives us confidence in our ability to implement share buybacks, increase our dividend, reduce debt, and keep capacity for opportunistic M&A. We expect to end 2024 with a net debt-to-adjusted EBITDA ratio of approximately 0.8 times, up slightly from the 0.5 times discussed previously, as we intend to allocate more free cash to the NCRB.
Mark L. Segal: For 'twenty 'twenty four we continue to expect Melissa Doug adjusted EBITDA margins to be approximately 19, 5%.
Mark L. Segal: The consistent cash flow, we've generated gives us confidence in our ability to implement share buybacks increase our dividend reduce debt and keep capacity for opportunistic M&A.
Mark L. Segal: We expect to end 2024, with a net debt to adjusted EBITDA ratio of approximately 0.8 times up slightly from 0.5 times discussed previously as we intend to allocate more free cash to the in CIB.
Mark L. Segal: Cash interest paid will be around $25 million in 2024, up slightly from the March estimate due to higher average leverage. However, our consolidated effective tax rate estimate remains at approximately 26%. CapEx is expected to be just under 6% of revenue, slightly lower than previously guided. We now expect depreciation and amortization to be slightly lower than previously advised at $116 million vs. $120 million and for Melissa and Doug DNA to be $32.5 million vs. $30 million.
Mark L. Segal: Cash interest paid will be around $25 million in 2020 full up slightly from the March estimate due to higher average leverage.
Mark L. Segal: Our consolidated effective tax rate estimate remains at approximately 26% capex.
Mark L. Segal: Capex is expected to be just under 6% of revenue slightly lower than previously guided.
Mark L. Segal: We now expect depreciation and amortization to be slightly lower than previously advised at $116 million gross $120 million and four Melissa dog DNA to be $32 5 million versus $30 million.
Mark L. Segal: Sophia will provide details on Creative Center and Cogsverse other categories for you after the course. In conclusion, we remain well positioned strategically, financially, and operationally. We also remain fully committed to continuing to execute our strategy for long-term growth and shareholder value creation. That concludes our prepared remarks. We will now be pleased to take questions. Operator, please open the line.
Mark L. Segal: Sofia will provide details by creative Santa and Cogs versus other categories for you after the call.
Mark L. Segal: Yeah.
Mark L. Segal: In conclusion, we remain well positioned strategically financially and operationally.
Mark L. Segal: We also remain fully committed to continuing to execute our strategy for long term growth and shareholder value creation.
Mark L. Segal: That concludes our prepared remarks, we will now be pleased to take questions. Operator. Please open the line.
Operator: Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you have a question, please press star followed by the number one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you would like to cancel your request, please press star 2. Please ensure you lift the handset if you're using a speakerphone before pressing any keys.
Speaker Change: Thank you, ladies and gentlemen, we will now conduct the question and answer session. If you have a question. Please press star followed by the number one on your Touchtone phone.
Operator: You will hear at the Nippon acknowledging your request.
Operator: If you would like to cancel your request please press star two.
Operator: Please ensure you lift the handset if you're using a speaker phone before pressing net's.
Operator: One moment, please, for your first question. Your first question comes from the line of Brian Morrison from TD Cowen. Your line is now open. Your first question comes from the line of Brian Morrison. Your line is now open. Apologies. Good morning, Mark.
Speaker Change: One moment. Please for your first question.
Operator: Your first question comes from the line of Brian Morrison from TD carbon your line is now open.
Operator: Your first question comes from the line of Brian Morrison. Your line is now open.
Operator: Apologies. Good morning, Mark. Good morning. Good morning, Brian.
Brian Morrison: Apologies good morning, Marc Good morning Max.
Operator: Good morning, Brian.
Max Rangel: So I guess we'll tackle Melissa and Doug head-on here. While you guided us on a more pronounced seasonality for its revenue, it's pretty clear that consensus didn't bake in that that would lead to greater seasonal variance or deleverage in the margin, and I think that really explains the Q1 shortfall to consensus. So, Max, maybe you can start. I think it's important to unpack and provide confidence in the Melissa and Doug outlook and ability to hit your guidance, specifically after a few headwinds out of the gate here.
Brian Morrison: So I guess lets tackle the Melissa Doug head on here why you guided us on a more pronounced seasonality for its revenue its pretty clear that consensus didn't bake in that that would lead to greater seasonal variance or deleveraging in the margin and I think really explains the Q1 shortfall to consensus so.
Max Rangel: <unk>, maybe you can start I think it's important to unpack and provide confidence in the Melissa Doug outlook and ability to hit your guidance specifically after a few headwinds out of the gate here and then Marc I know, it's small based on the annual guidance context, but can you provide clarity on how we should think about toy seasonality for both the incumbent operations and Melissa and Doug the remainder of the year and how.
Max Rangel: And then Mark, I know it's small based on the annual guidance context, but can you please provide clarity on how we should think about TOEIC seasonality for both the incumbent operations and Melissa and Doug for the remainder of the year and how we should think about the quarterly margin cadence for the TOEIC segment year-over-year as we progress through the year?
Max Rangel: We should think about the quarterly margin cadence for the toy segment year over year as we progressed through the year.
Max Rangel: Great question. So let me take the first part, and then I'll turn it over to Mark. So here's what I would tell you about Melissa and Doug in the first four months of the year. We have seen sequential improvement month on month since January, culminating in Easter week, when we grew above the category, and that's really important. And that was driven by the core business and new items like StickerWild, which I commented on. Now, following Easter, and maybe before I tell you about after Easter, I just want to give you some context because I think it's really important.
Speaker Change: Great question. So let me let me take the first part and then I'll turn it over to Mark.
Max Rangel: So here's what I would tell you about Melissa Doug in the first four months of the year, we have seen sequential improvement month on month since January.
Max Rangel: Culminating an Easter week in which we grew up both the category and that's really important and that was driven by the core business and new items like sticker, while which I commented on.
Max Rangel: Now following Easter and maybe before I tell you tell you about after Easter I just wanted to give you some magnitude because I think it's really important.
Max Rangel: January consumption was down double-digit, high double-digit, and that improved in February to 10% down. It improved in March to down 3.9%, and in Easter week, we were up almost 1%. So we saw sequential improvement, which is really important. And since Easter, we continue to see brand performance at or above the category rate, and that's also really important. And so we've caught up through the, obviously, four months and are in a better position.
Max Rangel: January consumption was down double digit high double digit and that improved in February to 10% down at.
Max Rangel: It improved in March through down three 9% and in Easter week, we were up almost 1%.
Max Rangel: So we saw the sequential improvement which is really important.
Max Rangel: Since Easter we continue to see their brand performance at or above the category rate and thus also really important and so we've caught up through the obviously four months and are in a better position.
Max Rangel: What's more encouraging, and as we look to the balance of the year, there are two things to note. The items that we began to once again get behind with support up to Easter, that actually drove the performance, were the items that we would expect to do really well, given the evergreen nature and the saliency of these items. So the top 10 items in Melissa and Doug grew by 50% plus versus a year ago.
Max Rangel: What's more encouraging and as we look to the balance of year is two things to note.
Max Rangel: The items that we began to once again get behind with support up to Easter that actually drove the performance.
Max Rangel: Were the items that we would expect to do really well given the evergreen nature and the saliency of these items.
Max Rangel: So the top them items, you Melissa Doug grew in Easter, 50% plus versus year ago, and if you extend that to the 100 top items they were up 36% versus last year.
Max Rangel: And if you extend that to the 100 top items, they were up 36% versus last year. Some of their iconic evergreen items like Dull Sweep Mob, Burrow Bunny, and Dentist Set. Scoop and Serve Ice Cream were the items that truly drove that performance, and that's really important. On top of that, Sticker Wow was a top 10 item in Q1 per Circana, and as we look to the balance of the year, In Q3-Q4, we had twice as much revenue from new items in Melissa and Doug than we did last year.
Max Rangel: Some of the iconic evergreen items like those sweep mob borrowed money dentist sets scoop and serve ice cream where to items that truly drove dot performance and that's really important on top of that sticker while it.
Max Rangel: It was a top 10 item in Q1 versus or economy.
Max Rangel: And as we look to the balance of the year.
Max Rangel: In Q3, Q4, we have twice as much revenue.
Max Rangel: From new items in Melissa Doug than we did last year.
Max Rangel: So, as we get into the second half from a consumption perspective, where the inventory is netted and where the inventories have gotten to, and the plans for the second half, we have confidence we can deliver the guidance we've promised.
Max Rangel: So as we get into the second half from a consumption.
Max Rangel: Where the inventories netted in where to inventories have gotten too and the plans for the second half we have confidence we can deliver the guidance we promised.
Mark L. Segal: Thanks, Max. Now, Brian, I'm going to pick up the second part of your question. And I'm sorry if I'm going to give you a long answer, but I want everyone to clearly understand all the points about seasonality, both for Spin Master and for Melissa and Doug, from a top-line and bottom-line perspective, because it's clear that we need to make sure that the street understands this, and we don't have another situation where we have a kind of a difference between where the street is at and our expectations
Speaker Change: Thanks, Max So Bryan I'm going to pick up the second part of your question.
Mark L. Segal: And I'm, sorry, if I'm going to give you a long answer, but I want everyone to clearly understand all the points about seasonality both for spin Master and full Melissa Doug from a topline and bottom line perspective, because it's clear that we need to make sure. The street understands this and we don't have another situation.
Mark L. Segal: We have a kind of a difference between where the street is at.
Mark L. Segal: Our expectations. So so let me just reaffirm that.
Mark L. Segal: So let me just reaffirm that Spin Master has always been a seasonal business, and with Melissa and Doug, even more so, because Melissa and Doug is more heavily weighted towards the second half of the year than we are. So, if you actually look at Spin Master for a second, focusing on that, we've typically been around a 30% H1, 70% H2 GPS company. If you actually take the mathematical averages over the last five years, excluding 2022, it's actually around 31 to 69, to be precise.
Mark L. Segal: That spun Mercer has always been a seasonal business and with Melissa Doug even more so because Melissa Doug is more heavily weighted towards the second half of the year than we are.
Mark L. Segal: So if you actually look at our spin master for a set can focusing on that we've typically being around a 30% H, 170% H two GPS company. If you actually take the mathematical averages over the last five years, excluding 2022, it's actually around 31% to 69 to be precise.
Mark L. Segal: Now, as a company, we've always tried to encourage the street and all of you to focus on H1, H2, spring and fall, because that's the way the toy industry works. But we recognize that, obviously, we're a public company, and we have to report quarterly. So let me give you more granularity on the quarterly side of Spin Master, and then I'll do it for Melissa and Doug. Q1 is typically around 10-15% of Spin Master, Q2 is typically around 15-20%, and then you have Q3 at around 35-40%, and Q4 at around 25-30%.
Mark L. Segal: Now we as a company we've always tried to encourage the street and all of you to focus on H, one H to spring and fall because that's the way the toy industry works, but we recognize that obviously, we're a public company and we have to report quarterly So let me give you more granularity on the quarterly side of spin Master and then I'll do it.
Mark L. Segal: Millicent duck.
Mark L. Segal: Q1 is typically around 10% to 15% of spin Master Q2 is typically around 15% to 20% and then you have Q3 at around 35% to 40% in Q4 to around 25% to 30% that's typically the way the quarters breakdown.
Mark L. Segal: That's typically the way the quarters break. Melissa and Doug, on the other hand, are around 20% in H1 and 80% in H2, and the way the quarters break down in the second half of the year is around 40% in Q3 and around 40% in Q4. Just remember that Melissa and Doug is more domestic and has more e-commerce than Spin Master, which is why they're more heavily weighted towards the fourth quarter than we are.
Mark L. Segal: Melissa Doug on the other hand is around 20% in H, one and 80% in <unk> II and the way the cordis breakdown in the second half of the year is around 40% in Q3 and around 40% in Q4, just remember that Melissa Doug is more domestic and as more.
Mark L. Segal: E. Commerce, then spin master, which is why they are more heavily weighted towards the fourth quarter that we are it's very important to note that from an EBITDA perspective. Most in fact all of Melissa Doug's EBITDA is generated in the second half of the year due to the issues with operating leverage.
Mark L. Segal: It's very important to note that from an EBITDA perspective, most, if not all, of Melissa and Doug's EBITDA is generated in the second half of the year due to the issues with operating leverage. Now, if you look at Spin Master from an EBITDA perspective, in Q3, we typically make about 30% or even more EBITDA margins because we're shipping in large volumes in Q3, but we're not spending any dollars on marketing because that's when consumers are not actually shopping actively at that time.
Mark L. Segal: Now if you if you look at <unk>.
Mark L. Segal: Spin master from an EBITDA perspective.
Mark L. Segal: In Q3, we typically make about 30% or even more EBITDA margins, because we shipping in large volumes in Q3, but we're not spending any dollars on marketing because that's when what's not consumers are not actually shopping actively at that time. So in Q4, we actually have.
Mark L. Segal: So in Q4, we actually have lower volume but all of our marketing dollars, and so we typically have lower EBITDA margins in Q4, roughly mid-single digits to high-single digits. So that's the way that the seasonality in EBITDA typically breaks down by quarter. There are two nuances that I just wanna call out to you.
Mark L. Segal: <unk> volume, but all of our marketing dollars and so we typically have lower EBITDA margins in Q4, roughly mid single digits to high single digits.
Mark L. Segal: So that's the way that the seasonality in EBITDA typically breaks down by quarter.
Mark L. Segal: Two nuances that I, just want to call out to you.
Mark L. Segal: Firstly, in Q2 of last year, we shipped about $25 to $30 million of product for the second Paul movie, which is not going to anniversary this year. So that's something for you to keep in mind in your models. And also in 2023, keep in mind, we had about a 15 to $16 million EBITDA bump as a result of the Paul movie two, which again is not going to be an anniversary. So if you actually look at 23 EBITDA margins for the year, they were actually 21.3% excluding the second Paul movie. The final point that I will make on seasonality relates to SG&A. You saw our SG&A numbers in Q1 were extremely high because of deleveraging. But if you actually look at the year,
Mark L. Segal: Firstly in Q2 of last year, we shipped about $25 million to $30 million of product for the second pole movie, which is not kind of anniversary. This year. So that's something for you to keep in mind in your models and also in 2023 keep in mind, we had about a $15 million to $16 million EBITDA bump.
Mark L. Segal: As a result of the poll movie too, which again is not going to anniversary. So if you actually look at 'twenty three EBITDA margins for the year. They were actually 21, 3%, excluding the second pole movie.
Mark L. Segal: The final point that I'll make on seasonality.
Mark L. Segal: It relates to SG&A.
Mark L. Segal: You saw our SG&A numbers in Q1 O extremely high because of deleveraging, but if you actually look at the your <unk>.
Mark L. Segal: Typically, SG&A comes in at around 38% of revenue. So, if you put that all together, Brian, you and all the other analysts should be able to refine your models to make sure everything looks reasonable on a quarterly basis.
Mark L. Segal: Typically SG&A comes in at around 38% adjusted SG&A comes in around 38% of revenue.
Mark L. Segal: If you put that altogether, Brian you and all the other analysts hopefully we'll be able to refine your models to make sure everything looks reasonable on a quarterly basis.
Mark L. Segal: Okay, so thank you for the detail. If I'm just dumbing it down a bit here, Mark, it sounds like from a toy margin perspective, we're going to be down again in Q2 because of Melissa and Doug and then up in Q3 and Q4. Is that correct? Yes, that's correct. Okay.
Speaker Change: Okay. So thank you for the detail.
Mark L. Segal: Just dumbing it down a bit here mark it sounds like from a toy margin perspective, we're going to be down again in Q2.
Mark L. Segal: Because of them listen Doug and then up in Q3 and Q4 is that correct, yes, that's right.
Max Rangel: And then I guess when I look at the PAW Patrol $15 million makeup that needs to be achieved to get to flat year over year, I assume that the drivers of this are the entry into the value chain, the ramp of, or introduction of the digital games. You've got new licenses and IP. Am I thinking those are the drivers correctly? And then can you just update us on the progress on the timing of entry into the value segment and maybe just elaborate on the pre-launch assumptions on the active monthly users? I didn't catch that.
Mark L. Segal: Okay, and then I guess when I look at the Paw patrol.
Max Rangel: $15 million makeup that needs to be achieved to get to flat year over year.
Max Rangel: Assume that the driver is of this.
Max Rangel: Are the entry into the value chain the ramp of the intro of the digital games, you've got new licenses and IP am I thinking those are the drivers correctly and then can you just update us on the progress on timing of entry into the value segment and maybe just elaborate on the people on the active monthly users I didn't catch that.
Max Rangel: Okay, so there was a lot in there, Brian. I think you've accurately captured the growth drivers. I think both Max and I went through the growth drivers. I think there was a question in there about TocaLife World. Did I hear that correctly at the end?
Max Rangel: Okay.
Speaker Change: There was a lot in there Brian I think I think you've accurately captured the growth drivers I think bug Max and I went through the growth drivers.
Max Rangel: I think there was a question in there about telco Lifebelt did I hear that correctly at the end.
Max Rangel: Yeah, I want to understand two things. When do you have timing of entry into the value segment, where does that stand, and then active monthly users? I didn't quite understand the respite with respect to active monthly users on digital games.
Max Rangel: Yes, I just want to understand two things when are you going to progress when do you have timing of entry into the value segment, where does that stand and then the active monthly users I didn't quite understand the.
Max Rangel: Repreve with respect to active monthly users on digital games.
Max Rangel: So the timing of entry into the value channel is the second half of the year, and it's relatively modest this year. And then on Toker Life World, what we called out was a reduction in the number of monthly active users, which drove a reduction in in-app purchases for the month. Just remember, it's a free-to-play game, and then we have to convert those players to revenue. So we saw a slightly lower conversion rate in Q1, but those players that did convert actually spent more. So we're gonna be focusing on driving that conversion ratio up and the spend ratio up over the balance of the year. Max, do you wanna just add anything to that?
Speaker Change: So the timing of entry into the value channel is the second half of the year and it's relatively modest this year and then on telco life World. What we called out was a reduction in the number of monthly active users.
Max Rangel: Which drove a reduction in app purchases for the months just remember it's a free to play game and then we have to convert those players to revenues. So we saw a slightly lower conversion in Q1, but those players that did convert actually spent more so we're going to be focusing on driving that conversion ratio up and spend ratio up.
Max Rangel: In the in the balance of the year next do you want to just add anything to that.
Max Rangel: I think, beyond that, I think if you look beyond this year, we're also launching Toca Boca Days, which is really an important complement to Toca Boca Life, and that happens basically as we described in the script, starting now, when we're live in two markets, and through the summer and into the fall for all the big global markets. So I think that's going to be a huge complement. Outside of that, Brian, I think the team is actually instituting several new things with content and new features for the balance of the year.
Max Rangel: I think beyond that I think if you look beyond this year. We're also launching took a bulker days, which is really an important complement to talk about book of life and that happens basically as we described in the script, starting now where we're driving to markets and through the summer and into the fall for all the big Global markets. So I think that is going.
Max Rangel: It'd be a huge compliment.
Max Rangel: Outside of that Brian I think the team is actually instituting several new things with content and new features offered a balance of the year. So that's basically took a life world.
Max Rangel: So that's basically Talk Alive World. And you also had comments about PAW, if I'm not mistaken, that you wanted us to address. And you talked about how we were going to make up the revenue that we're not getting from the movie across other parts of the line. I believe that's what you asked, and I just wanted to make sure I understood. Is that the question? Yeah, that's exactly right, Max. Thank you.
Matt: And you also had comments about Paul if I'm not mistaken that you want us to address and you talked about the how are we going to make up the revenue that we're not getting from the movie across other parts of the line I believe that's what you're asking I just wanted to make sure I pass to understand is that is that the question. Yeah. That's exactly right Matt. Thank you yeah.
Max Rangel: Yeah, and I think there's a number of things you should take into account. Number one, a year ago, we had Rubble successfully launch in the U.S., and we didn't have Rubble internationally. So this year, we're going to have Rubble basically be a big driver outside of the U.S., and that's an important complement. Second, if you look beyond infant preschool, we also have an important part of our innovation kicking in. And for all of us, innovation in 2024 is going to contribute three times what it contributed in 2023.
Max Rangel: And I think there's a number of things you should take into account number one a year ago, we hot rubble successfully launch into the U S and we didn't have robel internationally. So this year, we're gonna have ruble basically be a big driver outside of the U S and doesn't important compliment second if you look beyond even from preschool. We also have an import.
Max Rangel: Part of our innovation kicking in and for all of Us.
Max Rangel: Innovation in 2020 for us going to contribute three times, what it contributed in 2023.
Max Rangel: And if you look at our consumption in Q1 in 24, and you look at our consumption in 2023, and you see our glide path to achieving consumption objectives for the year, we're not in a very different place. We typically get a lot of our consumption upswings in the back half behind innovation. Because we have more new innovation in the pipeline for 2024 and there's great receptivity and commitment by customers to execute on that, we feel very confident that we will be able to overcome what you just described as PAU base period revenue.
Max Rangel: And if you look at the consumption in Q1 in 'twenty four and you look at our consumption in 2023, and you see our glide path to achieving consumption objectives for the year, we're not in a very different place, we typically get a lot of our consumption upswings in the back half behind innovation because.
Max Rangel: We have more new innovation in the pipeline for 2024, and there's great receptivity and commitment by customers to execute done we feel very confident that we will be able to overcome what you. Just described would be a PA base period revenue.
Max Rangel: I appreciate all the color. Thank you very much and good luck. Thank you.
Max Rangel: Okay.
Speaker Change: I appreciate all the color. Thank you very much and good luck.
Speaker Change: Thanks, Brian.
Operator: Your next question comes from the line of Martin Landry from Stiefel. Your line is now open.
Max Rangel: Your next question comes from the line of Martin Landry from Stifel. Your line is now open.
Martin Landry: Hi, good morning, guys.
Max Rangel: I want to just follow up on the last comment that you provided, Max. Did I hear you correctly when you said that innovations are going to have a 3x contribution to revenues versus 2023. Is that correct? Yeah, we're
Martin Landry: I wanted to just follow up on the last comment that you have provided Max.
Martin Landry: Did I hear you correctly.
Martin Landry: When you said that innovations.
Speaker Change: Is it going to have three.
Martin Landry: <unk> contribution to revenues versus 2023 is that correct. Yeah. We're very excited about the full 24 innovation pipeline.
Max Rangel: Yeah, we're very excited about the Fall 2024 Innovation Pipeline. We have a number of things that we're basically bringing incremental to what we would have had last year. And let's not forget, we had a really successful BT launch in 2023. And we're anniversarying that with two new executions on Bitsy to extend that success.
Max Rangel: We have a number of things that we're basically bringing incremental to what we would have had last year and let's not forget we had a really successful <unk> launch in 2023.
Max Rangel: And we're anniversarying that with two new executions, when bitsy to extend docks success and has been well received and so we feel good about that.
Max Rangel: And it's been well received, and so we feel good about that. Hatchimals is really net new incremental.
Max Rangel: <unk>, who is really net new incremental.
Max Rangel: And the opportunity to basically capitalize on that is huge, and we're feeling very, very strongly about it. Great receptivity. Third, we have Puny Rooms, which you might remember from the L.A. showroom.
Max Rangel: The opportunity to basically capitalize from that is huge and we're feeling very very strongly about it great receptivity.
Max Rangel: Third we have puny rooms, you might remember from DLA showroom, that's net new incremental we didn't have that last year.
Max Rangel: That's net new incremental; we didn't have that last year. Beyond that, we have great innovation in Monster Jam. We have great innovation on Paw Patrol, beyond, obviously, Rubble expanding into white space in Europe. And let's not forget one more thing we didn't have last year and is brewing to be a very big contributor to both the Spin Master portfolio and Melissa & Doug's portfolio, which is Ms. Rachel. So, Ms. Rachel is brewing to be a very big component of our revenue in the fall, and we're super excited. So, we have confidence in what we need to build between now and then. So, we have support in terms of marketing and sales support, promotional support, and PR support to bring this to life.
Max Rangel: And that we have great innovation on Monster Jam, we have great innovation on Paw patrol beyond obviously robo expanded into white space in Europe.
Max Rangel: And let's not forget one more thing we didn't have last year and he is bringing to be a very big contributor to both the spin master portfolio and Melissa Doug portfolio, we choose Ms. Rachel.
Max Rangel: Ms Rachel.
Max Rangel: Is brewing to be a very big component of our revenue in the fall and we're super excited so we have confidence in what we need to build to between now and then.
Max Rangel: So we have support in terms of marketing.
Max Rangel: And sales support and promotional support and peer support to bring this to life.
Max Rangel: Okay, so just to clarify, when you talk about innovation, it's not a new product. It's not a new brand. It's just, you know, new toys within an existing brand. Is that fair? It's a it's a it's
Max Rangel: Okay. So just to clarify when you talk about innovation, it's not a new.
Speaker Change: It's not a new brand.
Speaker Change: It's just a new toys within an existing brand is that fair.
Max Rangel: It's both, right? So if you think about Hatchimals, it's currently a brand, but the big egg has not been a component of the Hatchimals line for a long time. We rested it, and we're coming back with a big bang. So that's going to be net new on that line. As opposed to Rachel, which is a complete white space, there's nothing in the base, we're launching it basically from scratch. Or Puny Runes, there's nothing in the base, we're launching it from scratch, a brand new brand. And so I think it's a combination of both.
Max Rangel: So it's a it's both right. So if you think about <unk> <unk>, who is currently our brand, but the big AG has not been a component of the <unk> line for a long time, we arrested it and we're coming back with a big Bang. So that's going to be net new on that line as opposed to Rachel which is complete white space.
Max Rangel: Theres nothing in the base, we're launching in basically from scratch or puny runes theres nothing in the base, we're launching from scratch brand new Brown.
Max Rangel: And so I think it's a combination of both.
Max Rangel: Okay.
Max Rangel: And lastly, just to touch quickly on Melissa and Doug, how's the inventory quality both at retail and within your warehouses? Is there a cleanup that's needed to do to clear some of the maybe low selling skews, or is the inventory in good shape?
Max Rangel: Sure.
Max Rangel: And lastly, just to touch quickly on Mellissa and Doug.
Max Rangel: How's the inventory quality.
Max Rangel: Both at retail and.
Max Rangel: Within your warehouses.
Max Rangel: Is there a cleanup that's needed to do to clear some of the maybe the low selling skus or is the inventory.
Max Rangel: And good in good shape.
Mark L. Segal: So, Martin, the inventory's clean. There are no concerns about the inventory. Really, what we've been dealing with, I think, through the last period of time, both pre-acquisition and post-acquisition, was that I think the inventory levels were high, but because the line is recurring in nature, it's simply a question of working it down. And I think their numbers have come down. If you actually ignore the fair market value adjustment, their Q1 inventory was significantly down compared to the same period last year. And we expect by the end of the year, it'll be down much further.
Max Rangel: So what's in the inventory is clean.
Mark L. Segal: There's no concerns on the inventory.
Mark L. Segal: Really what we've been dealing with I think through the last period of time, both pre acquisition and post acquisition was that I think the inventory levels were high but because the line is recurring in nature. It's simply a question of working it down and I think the numbers have come down if you if you ignore the fair.
Mark L. Segal: Market value adjustment, there Q1 inventory was significantly down compared to the same period last year and we expect by the end of the year it'll be down much further so we're not concerned about Melissa Doug inventory I think it's in good shape both.
Mark L. Segal: So we're not concerned about Melissa and Doug inventory. I think it's in good shape, both in our warehouses and at retail, as is ours at retail as well. However, our inventory is down year over year. Spin Master inventory is down year over year in our warehouses and at retail quite significantly. So I think from a retail perspective, we're actually in good shape overall with inventory.
Mark L. Segal: Okay. Okay.
Mark L. Segal: In our warehouses and at retail.
Mark L. Segal: As these hours at retail as well our inventory is down year over year spun mass inventory is down year over year.
Mark L. Segal: In our warehouses ended retail quite significantly so I think from a retail perspective, we're actually in good shape overall with inventory.
Operator: Thank you very much. Best of luck. Good luck.
Speaker Change: Okay. Okay. Thank you very much best of luck best of luck.
Speaker Change: Thank you.
Operator: Your next question comes from the line of Jamie Katz from Morningstar. Your line is now open.
Operator: Your next question comes from the line of Jamie Katz from Morningstar. Your line is now open.
Max Rangel: Hi, thanks for taking my question. I'd be curious to hear what progress you guys are making in maybe expanding Melissa and Doug abroad, given its primarily U.S. focus and the ability to grow to a much wider distribution base.
Jaime M. Katz: Thanks for taking my question.
Jaime M. Katz: Just curious to hear what progress on <unk>.
Jaime M. Katz: You guys are making.
Max Rangel: Maybe expanding millican that Brad.
Max Rangel: Primarily.
Jaime M. Katz: U S guests and.
Max Rangel: The ability to grow to a much wider distribution base.
Max Rangel: Jamie, good morning. I will tell you that progress, broadly, is happening in 25, particularly in Europe and other markets around the world. However, we've already begun that expansion in Canada and Mexico. So in North America, we prioritize, taking over the business in Canada and taking over the business in Mexico, which was actually being done through distributors. And we have two really strong teams in both countries.
Max Rangel: Jamie Good morning, we're making progress I would tell you that the progress broadly.
Max Rangel: Is happening and twenty-five.
Max Rangel: Particularly in Europe, and other markets around the world. However, we've already begun that expansion in Canada, and Mexico, and North America, we prioritize taking over the business in Canada and digging over to business in Mexico, which was actually being done through distributors and we have two really strong teams in both countries and that's going to happen basically starting.
Max Rangel: And that's going to happen basically starting now. And so basically, we're about to ship within 30 days to our first major customer in Canada. So we're excited about that. And that happens in the next two, three months in Mexico as well. So we're getting going. And so at the same time, we're getting the line curated and ready to go and expand more broadly beyond North America.
Max Rangel: Now and so basically we are about to ship within 30 days into our first major customer in Canada. So we're excited about that and that happens in the next two to three months in Mexico as well so were getting going and so at the same time, we're getting the line curated and ready to go and expand more broadly beyond.
Max Rangel: In North America.
Mark L. Segal: And just to add to that, sorry Max, just to add one point, as Max described the conversion of distributors to our own in-house selling, we do get the volume pickup and the margin pickup as a result of that as well. So that's another reason, you know, behind the confidence in our earlier reaffirmation of our guidance for 2024.
Speaker Change: And just to add to the mix just to add one point as <unk> described the conversion of distributors to our own in house selling we do get the volume pick up and the margin pickup as a result of that as well. So that's another reason behind the confidence in al earlier reaffirmation of our guidance for <unk>.
Mark L. Segal: Thousand 24.
Max Rangel: That's helpful.
Max Rangel: I hope that's helpful. I don't know that it's been discussed much, but the efficiency of the marketing and promotional programs, I mean, the shift to value would probably indicate that there may be more hand-holding to facilitate conversion from consumers. So has there been a step-up in the marketing and promotional ROI that you guys are seeing, or are you finding different ways to connect with consumers than in the past?
Mark L. Segal: I don't know that it's been discussed much.
Max Rangel: <unk> CEO of the marketing and promotional programs I mean, the shift to value with.
Max Rangel: Probably indicate that there may be more handholding to facilitate conversion from consumers. So has there been a step up in the marketing and promotional like ROI that you guys are seeing or are you finding different ways to connect with consumers in the past.
Max Rangel: Are you speaking to Melissa and Doug specifically, or are you speaking broadly? I just want to make sure I answer your question well.
Speaker Change: Are you speaking to Melissa Doug specifically are your speaking broadly I just want to make sure I answer your question well.
Max Rangel: Yes.
Speaker Change: Okay excellent. So let me start with Tory I think enjoy you would've seen in our numbers that we did increase our marketing investments in Q1.
Max Rangel: Okay. Excellent. So, let me start with Toye.
Max Rangel: I think in Toye, you would have seen in our numbers that we did increase our marketing investments in Q1, and we were able to get a return on that where we spent that. And it's basically a reflection of our consumption. And in some places, we actually got really great consumption results for that marketing investment. For Melissa and Doug specifically, Jamie, we only began to increase the investments digitally towards the end of the quarter, and more broadly beyond digital, starting in Q2. So we're, you know, very, very steeped in that process. And we are ROI-driven, as you can imagine. So we will be watching that very closely.
Max Rangel: And we were able to get the return on that where we spent done and he is basically a reflection of our consumption and in some places we actually got really great consumption results for that marketing investment in.
Max Rangel: <unk>, Melissa Doug specifically Jamie.
Max Rangel: Jamie we only began to increase the investments digitally towards the end of the quarter and more broadly beyond digitally starting in Q2. So we're.
Max Rangel: Very very steeply dot process and we are ROI driven as you can imagine so we will be watching that very closely.
Max Rangel: Beyond toys, we've invested in marketing for our franchises, specifically Unicorn Academy, Vita the Vet, and, of course, Paw Patrol. And then, and beyond that, it is really about audience and building our audience and basically deepening love with our audience for those franchises. Beyond that on digital games, we also increased marketing in Q1, and that was really more about getting subscribers. And we've been testing and testing weekly, and the return on ad spend in our subscription business is very, very healthy, a reason for which we have, in fact, increased even more.
Max Rangel: Beyond beyond.
Max Rangel: Toy we've invested in marketing in our franchises, specifically Unicorn Academy veto the vet and of course Paw patrol and then beyond that in and one that is really about audience.
Max Rangel: And building, our audience and basically deepening love with our audience for those franchises beyond that on digital games. We also increased marketing in Q1 and that was really more on getting subscribers and we've been testing and <unk> weekly and <unk> return on AD spend in our in our subscription business.
Max Rangel: <unk> is being very very healthy recent for which we have.
Max Rangel: Fact increase even more and so mark alluded to picnic and poor Academy in those two businesses are doing really well for us and quite a bit about is b.
Max Rangel: And so Mark alluded to Picnic and Poe Academy, and those two businesses are doing really well for us. And quite a bit of that is beyond, you know, besides the fact that it's great content for children and we have a unique opportunity to own that space, our paid user acquisition performance marketing machine is really working well.
Max Rangel: Besides the fact that these great content for children, and we have a unique opportunity to own that space.
Max Rangel: Our paid user acquisition performance marketing machine is really working well.
Speaker Change: Okay. Thank you.
Operator: Your next question comes from the line of Luke Hannan from Canaccord Genuity. Your line is now open.
Max Rangel: Your next question comes from the line of Luke Hannan from Canaccord Genuity. Your line is now open.
Max Rangel: Thanks and good morning. I'll start with Melissa and Doug. You've had a public competitor of yours come out and announce they're going to be pushing a little bit more deeply into the wooden toys business, so I'm just curious if you could disclose roughly what percentage of Melissa and Doug's revenues are attributable to wooden toys in particular.
Luke Hannan: Thanks, and good morning.
Max Rangel: I'll start with with Melissa and Doug We've had a public competitor of yours come out and announce that theyre going to be pushing a little bit more deeply into the wooden toys business. So I'm. Just curious if you can disclose roughly what percentage of <unk> revenues are attributable to a wooden toys in particular.
Max Rangel: Well, most of Melissa and Doug's business is wooden toys, right? So the vast majority of their line represents wooden toys, Luke. That's the basic component of their business. There are some elements that are not wood, like stickawow and a few other areas. I don't have the exact percentage off the top of my head, but the majority of Melissa and Doug's business is wooden toys. Yeah.
Max Rangel: Well most of Melissa Doug's businesses Wood wood toys right. So the vast majority of their line represents wooden toys look that's the basic.
Max Rangel: Components of their business, they OSM element that or not we would like to stick a well and a few other areas I don't have the exact percentage off the top of my head, but the majority of Melissa Douglas Wood and toys.
Max Rangel: Yeah, Luke, good morning, and great questions. So I think we're super excited about the Melissa and Doug investments we're making in the brand. It was one of the key items we discovered had to get done, and I think the team is now beginning to do that. Second, we're really excited about us bringing innovation to Melissa and Doug. And, you know, we talked about Sticker Wow, but beyond Sticker Wow, there are two or three items that are going to be huge.
Speaker Change: Good morning, and Great question. So I think we're super excited about the Melissa Doug investments, we're making on the brand.
Max Rangel: Was one of the key items, we discover how to get done and I think the team is now beginning to do that.
Max Rangel: Second we're really excited about us, bringing innovation to Melissa Doug and we've talked about sticker wild would be on sticker, while there's two or three items that are going to be huge and I made reference to the fact that when we did put marketing behind the line and particularly around Easter we saw a tremendous return on that investment as I alluded to.
Max Rangel: And I made reference to the fact that when we did put marketing behind the line, in particular around Easter, we saw a tremendous return on that investment, as I alluded to in our consumption numbers growing, you know, over 50 percent. So the launch of the competitive wooden line that you allude to is just starting. And the really wonderful news is that where it started, and the week that it started, our brand grew 40 percent.
Max Rangel: Our consumption numbers growing over 50%.
Max Rangel: So the the launch of the competitive wooden line that you allude to is just starting and they're really wonderful news is where it started in the week that he started our brand grew 40%. So we welcomed the attention to the to the category and listen there has been a leader in wood for so long and he's so trusted.
Max Rangel: So we welcome the attention to the category. Melissa has been a leader in wood for so long and is so trusted. And the quality of our brand is so beloved that this heirloom piece is going to basically force us to actually do what we need to do, which is to love the brand, invest in the brand, and continue to grow the brand.
Max Rangel: And the quality of our brands so beloved that these heirloom piece.
Max Rangel: We're going to basically take us two to actually do what we need to do which is to love the brown invest in the brand and continue to grow the brand.
Max Rangel: Okay, it's great to hear. And then, shifting to the digital games business, I know it's extremely, extremely early days. I don't even think it's been in the market for a week yet, but what has been the initial reception for Tokadays in Australia and New Zealand? Are you seeing that conversion of players from TokaLife World into Tokadays? Or, right now, is it just more of an influx of those, that new player base, those aged five to eight? And then also, maybe we should start with those markets first rather than some other markets?
Max Rangel: Okay.
Speaker Change: Great to hear and then shifting to the digital games business I know its extremely extremely early days I don't even think it's been in the market for a week yet, but what has been the initial reception for <unk> in Australia, and New Zealand are you seeing that conversion of players from took a life world into toga days or right.
Max Rangel: Now is it just more of an influx of those that new player base those H <unk>.
Max Rangel: Five to eight and then also maybe why starting with those markets first rather than some other markets.
Max Rangel: Yeah, so I'm so glad that you asked about Toka Days because I remember sitting not far from you when we were actually showcasing this. And if you would see it now, I encourage you to go do it.
Speaker Change: Yeah. So.
Speaker Change: I'm, so glad that you asked about Tokyo days, because I remember sitting not far from you when we were actually showcasing this.
Speaker Change: And if you would see it now I encourage you to go do it it has actually progressed, even more so it's very exciting so to get to the to the punch line. We started in Australia, New Zealand and subsequently are going beyond that.
Max Rangel: It's actually progressed even more, so it's very exciting. So to get to the punch line, we started in Australia and New Zealand and, subsequently, are going beyond that.
Max Rangel: Because these are test markets, control markets, where we actually get a ton of learning. And we basically get a lot of return on the learning that we get in very real life. They're, you know, they're marketing which, People are also very vocal.
Max Rangel: Because he started test market control markets, where we actually get a ton of learning and we basically get a lot of return on the learning that we get.
Max Rangel: Very much real life.
Max Rangel: There are markets in which.
Max Rangel: People are also very vocal our team has a lot of great testing experience and so we get we get a lot from from just going there. We also gain early testing knowledge on technology, our tech and obviously up stability and so there's a lot to be gained from going to those markets first and so far the reception has been terrific. It's so.
Max Rangel: Our team has a lot of great testing experience, and so we gain a lot from just going there. We also gain early testing knowledge on technology or tech and, obviously, app stability. And so there's a lot to be gained from going to those markets first. And so far, the reception has been terrific. It's so early that I wanna be cautious to not overstep, but it's doing really well.
Max Rangel: Early that I wanted to be cautious to not overstep, but it's doing really well.
Mark L. Segal: Great. Last one for me, and then I'll pass the line. Eventually, we are going to get to a point here where there are a lot more within the digital game segment in terms of titles and properties that are representing a good chunk of revenue and EBITDA. Should we think about, or are you thinking about enhancing the disclosure there so that we can get a better sense of revenue by title, EBITDA by title, and maybe some other metrics such as ARPU, for example?
Speaker Change: Great last one for me and then I'll pass the line eventually we are going to get to a point here, where there is a lot more within the digital games segment in terms of titles and properties that are representing.
Mark L. Segal: Excuse me a good chunk of revenue and EBITDA should we think about or are you thinking about enhancing the disclosure there. So that we can get a better sense of the revenue by title EBITA by title and maybe some other metrics such as <unk> for example.
Operator: So, Luke, it's a good question. We are thinking about how to best describe digital games because the metrics are very different, for example, to what you would see in toys or entertainment. In fact, all three of our businesses, we have expanded disclosure recently, as you know, with the breakdown of P&Ls for each creative center, which I think has given the investment community much deeper insight into the business. But yes, to answer your question, we are looking at ways to describe digital games with different metrics and enhanced metrics to help you understand the business better and hopefully drive shareholder value through that because, you know, as a company, we don't necessarily feel that our digital games business gets the credit that it deserves in terms of our portfolio.
Speaker Change: So look at it.
Operator: It's a good question, we are thinking about how to best describe digital games because the metrics are very different for example to what you would see Entoil Entertainment in fact, all three of our businesses. We have expanded disclosure recently as you know with the breakdown of P&l's for each creative center, which I think is given the investment community.
Operator: Much deeper insights into the business, but yes to answer your question. We are looking at ways to describe digital games.
Operator: With different matrix and enhanced metrics to help you understand the.
Operator: The business better and hopefully drive shareholder value through that because.
Operator: I think, Luke, just to add to Mark's comments, I want you to please rest assured, before we get to disclosure, know that we look at the business very differently between our subscription business and, obviously, the subscription, the ROAS, the churn, and the LTV as we model the business going forward and are very, very focused on that. And so when it gets to the app model, and specifically whether it would be Rubik's match or Toka Boka Life or Toka Boka Days, you know, we're getting into D1, D3, D7, Fatui.
Operator: As a company, we don't necessarily feel that our digital games business gets the credit that it deserves.
Operator: Portfolio I think Luc just to add to Mark Mark's comments I want you to please rest assure when before we get to disclosure no that we look at the business very differently between our subscription business and obviously the subscription.
Operator: Rollout.
Operator: Churn in the LTV as we model the business going forward and are very very focused on that.
Operator: And so when it gets to the model and specifically whether it would be rubik's match or took a book of life or took a book of days, we're getting into <unk> seven for two weeks I mean, we have significant depth of how we are treating and basically keeping up with this business kpis.
Operator: I mean, we have significant depth in how we are treating and basically keeping up with these business KPIs, and we are measuring by title and have a great depth of information by title. So anyway, so far, things are progressing.
Operator: And our measuring by title and have great depth of information by titles so anyway.
Operator: So far things are progressing.
Speaker Change: Okay. Thank you very much.
Operator: Your next question comes from the line of John Zamparo from CIBC. Your line is now open.
Operator: Your next question comes from the line as John's on Pyro from CIBC. Your line is now open.
Mark L. Segal: Thank you very much. A couple of housekeeping questions. First, I wonder if you can quantify the shift in Easter timing, either in revenue or gross product sales for Spin Master?
John Zamparo: Thank you very much a couple of housekeeping questions first I Wonder if you can quantify the shift in Easter timing either on revenue or gross product sales for spin master.
Mark L. Segal: It was one week, John. The one week shifted, not the whole Easter period. It wasn't a material shift. I don't have a specific number to quote, but I don't think it was material, but it did actually have an impact on POS, as we described. We can get back to you later with a more granular answer, but in the overall scheme of things, not very specific on the PRS.
John Zamparo: It was one week John.
Mark L. Segal: The one week shifted not the whole Easter period.
Mark L. Segal: Wasn't a material shift I don't have a specific number to quote, but I don't think overall that cluster material, but it did actually have an impact on on Pls as we described.
Mark L. Segal: We can get back to you later with a more granular answer but in the overall scheme of things not very significant on the bureaus. John just so that you have that now and then Mark can follow up I think he is basically.
Max Rangel: On the PRS, John, just so that you have that now and then Mark can follow up, I think it's basically, it's, the impact is... an industry that shows growth versus without Easter and that shift, an industry that is declining both dollars and units, just to be clear, and that's a decline in the low single-digit number.
Max Rangel: It is.
Max Rangel: The impact to us.
Max Rangel: An industry that shows growth versus without Easter and that shift in industry that declining both dollars and units just to be clear and that's a decline of in the low single digit number.
Mark L. Segal: Okay, that's helpful. Thank you.
Speaker Change: Okay. That's helpful. Thank you.
Speaker Change: And Melissa and Doug can you say, how revenue and EBITDA look relative to last year I know, it's not seasonally relevant quarter or maybe asked another way was the Pos number in Q1 reflective of their reported numbers.
Operator: On Melissa and Doug, can you say how revenue and EBITDA look relative to last year? I know it's not a seasonally relevant quarter, or maybe ask it another way. Was the POS number in Q1 reflective of their report?
Mark: Yes, so John obviously, we don't we're not providing comparable numbers for four Melissa Doug.
Mark L. Segal: Yeah, so John, you know, obviously we don't provide comparable numbers for Melissa and Doug, but just given the acquisition timing. But the reality is that it's relatively consistent with prior years. In fact, Q1 was a little bit better than last year than it was in prior years. As I said to you, Melissa and Doug will be EBITDA negative in H1 and make all of their EBITDA in H2, in line with their 40% Q3 and 40% Q4 revenue. So really, the period to focus on for Melissa and Doug will be the second half of the year.
Mark L. Segal: Can you just given the acquisition timing, but the reality is that it's relatively consistent with prior years. In fact, Q1 was a little bit better than this year than it was in prior years as I say to you.
Mark L. Segal: Melissa Doug will be.
Mark L. Segal: EBITDA.
Mark L. Segal: Negative in H, one and make all of the EBITDA in <unk> in line with a 40% Q3, and 40% Q4 revenue so really the.
Mark L. Segal: The period to focus on for Melissa Doug will be the second half of the year.
Mark L. Segal: Okay, and then on capital allocation, you recently filed a mixed shelf. I wonder if there's anything that's worth calling out on this.
John: Okay, and then on capital allocation you recently filed a mixed shelf I wonder if there's anything that's worth calling out on this.
Mark L. Segal: No, this was a renewal of a previously filed shelf that had expired. It's a two-year window, and we simply renewed the existing shelf, or the pre-existing shelf, for a further two years, but nothing specific to call out on that.
Speaker Change: No. This was a renewal of our previously filed shelf that had explore.
Mark L. Segal: Expired, it's a two year window, and we simply renewed the existing shelf.
Mark L. Segal: With a pre existing shelf for a further two years, but nothing specific to call out on that.
Mark L. Segal: Okay. And then last one, sticking with capital allocation, you doubled the dividend, and you're using the buyback program. I wonder whether an SIB is a topic of discussion at the board meetings.
Mark L. Segal: Understood and then last one sticking with capital allocation you doubled the dividend youre using the buyback program I wonder whether an <unk> is a topic of discussion at the board level.
Mark L. Segal: Well, you know, the board reflects on capital allocation every quarter. I think we've been pretty specific in the script today and the plans that we've articulated around the buyback program. We have around 3 million shares authorized for 2024. We've already executed about 600,000 of that, and we'll continue to execute on the balance for 2024. And we increased the dividend or doubled the dividend, which I think is reflective of the board's desire to consider total shareholder return as part of the equation for Spin Master. And so I think they'll continue to do that. We're not going to comment specifically on an SIP or anything else, but rest assured that it's something that the board reflects on on a quarterly basis.
Speaker Change: Well the board reflects on capital allocation every quarter I think we've been pretty specific in the script today and the plans that we've articulated around the buyback program. We have around 3 million shares authorized for 2020 full we've already executed about 600000 of that in.
Mark L. Segal: We'll continue to to execute on the balance for 2024, and we increased the dividend will double the dividend, which I think is reflective of the boards desire to consider total shareholder return as part of the equation of spin Master and so I think they'll continue to do that we're not going to comment specifically on it.
Mark L. Segal: <unk>.
Mark L. Segal: Els, but rest assured that it's something that the board reflects on on a quarterly basis.
Operator: Okay, that's helpful. I'll leave it there. Thank you. Your next question comes from the line of Kylie Kohu from Jefferies. Your line is now open.
Speaker Change: Okay. That's helpful I'll leave it there thank you.
Kylie Nicole Cohu: Thanks, Sean.
Kylie Nicole Cohu: Your next question comes from the line of Cai.
Kylie Nicole Cohu: <unk> from Jefferies. Your line is now open.
Max Rangel: Hey, thank you guys so much for taking my question.
Kylie Nicole Cohu: Thank you guys finished.
Kylie Nicole Cohu: <unk> My question.
Kylie Nicole Cohu: I'll kind of keep it brief.
Kylie Nicole Cohu: Maybe just some cautious optimism from your retail partners I'm, just wondering if you could expand on that.
Kylie Nicole Cohu: And are expecting better demand than previously thought and I think of purchases just any color on that would be helpful. Thank you.
Max Rangel: Yeah, I think it's really more looking to, if you think about Easter and the sell-through, and obviously the fact that inventory levels are in a better place, and ultimately, you know, a return to discretionary spending and cycles, and so, and the fact that they want to make sure that their toy aisles are growing is what actually leads me to make that statement, and it's really kind of coming from them. They're also excited about the new level of innovation we're bringing, and so when I say cautious optimism, it's also basically people reacting to what is put in front of them, and I think...
Kylie Nicole Cohu: Yeah, I think it's really more looking to.
Max Rangel: If you think about Easter and the sell through and obviously, the fact that inventory levels are in a better place and ultimately a return to discretionary.
Max Rangel: And cycles, and so and the fact that they want to make sure that their toy aisles are growing.
Max Rangel: Is what actually leads me to make that statement and he is really kind of coming from them. They're also excited about the new level of innovation, we're bringing in so when I say cautious optimism is also basically people are reacting to what is putting in front of them and I think the.
Max Rangel: The retail group has reacted incredibly positively to our lineup. And so, last but not least, I think there's obviously in Europe also the same level of optimism for the line. So it's not just the US, you know, three customer sentiment is beyond that. And so that's basically what constitutes our comment.
Max Rangel: The retail group has reacted incredibly positive to our to our lineup and so last but not least I think there is there is obviously.
Max Rangel: In Europe <unk>.
Max Rangel: So the same level of optimism for the line. So it's not just the U S.
Max Rangel: Three customer sentiment is beyond that and so thats basically what constitute our comment.
Speaker Change: Okay Super helpful.
Max Rangel: Helpful.
Max Rangel: Okay.
Operator: Your next question comes from the line of Drew McReynolds from RBC. Your line is now open.
Max Rangel: Your next question comes from the line of drew Mcreynolds from RBC. Your line is now open.
Mark L. Segal: Yeah, thanks very much. Good morning. Just, I guess, three housekeeping items for me and maybe over to you, Mark. Not to get too granular here, but, you know, in the spirit of Brian's question earlier for Q2, Melissa and Doug, you commented on negative EBITDA for the first half, presumably that's another negative adjusted EBITDA for Q2. Second, just on the cadence of cost synergies, we saw a little bit come in here in Q1 of the imputed $6 million you expect to realize. I was just wondering how that is going to play out for the rest of the year.
Drew McReynolds: Yes, thanks very much good morning, just I guess three housekeeping for me and maybe over to you Mark.
Mark L. Segal: Not to get too granular here, but the spirit of Brian's question earlier for Q2.
Mark L. Segal: Melissa Doug.
Mark L. Segal: You commented on negative EBITDA for the first half presumably that's another negative adjusted EBITDA for Q2 is the question.
Mark L. Segal: Second just on the cadence of the cost synergies, we saw a little bit come in here in Q1.
Mark L. Segal: In tiered 6 million you expect to realize just wondering how that is.
Mark: It's going to play out for the rest of the year and then just finally.
Mark L. Segal: And then just finally, the big picture on the dividend policy, so great to see the doubling of the dividend, just wondering, you know, what kind of levels of a payout ratio that the board kind of contemplates when, you know, setting the dividend. Thank you.
Mark L. Segal: Big picture on the dividend policy, so great to see the doubling of the dividend just wondering.
Mark L. Segal: They're kind of levels.
Mark L. Segal: Payout ratio that the.
Mark L. Segal: The board kind of contemplates when setting the dividend. Thank you.
Mark L. Segal: Yes.
Mark L. Segal: Hi Drew, and welcome, I think, to your first official call covering Spin Master. So to answer your question about Melissa and Doug, you know, in terms of their seasonality, I said to you around 20% of their volume in H1, a roughly even split. So there will be an adjusted EBITDA loss for Melissa and Doug for the second quarter. Also, just wanted to reiterate what I said earlier in case everyone didn't pick it up around the Paw Patrol movie shipments that we had in the second quarter. So I just want to, which won't be our anniversary, obviously, so just keep that in mind.
Mark: Hi, drew and welcome that I think to your first official call covering spin master.
Mark L. Segal: To answer your question around Melissa Doug.
Mark L. Segal: In terms of the seasonality is set to around 20% of the volume.
Mark L. Segal: In H, one around roughly even split so there will be an adjusted EBITDA loss for Melissa Doug for the second quarter.
Mark L. Segal: And also just wanted to reiterate what I said earlier in case, everyone didn't pick it up around the pole patrol movie shipments that we had in the second quarter. So I just wanted to which one to anniversary obviously, so just keep that in mind.
Mark L. Segal: The seasonality of the synergies; we picked up some very minor cost synergies in Q1. We're starting to accelerate that program. We have a new leader who's looking after the integration and is very heavily focused on that. And so we'll start to see momentum building in Q2 and the second half of the year on the realization of the cost synergies, in particular, and some of the revenue synergies that Max referenced earlier. But a big chunk of those cost synergies, Drew, will actually happen in Q3 and Q4, some of which are volume-specific but are also now based on the programs that we're actually implementing and getting some momentum behind.
Mark L. Segal: The seasonality of the of the synergies we picked up some very minor cost synergies in Q1, we're starting to accelerate that program. We have a new leader who is looking after the integration and very heavily focused on that and so we'll start to see momentum building in Q2 into the second half of the year.
Mark L. Segal: On the realization of the cost synergies in particular and some of the revenue synergies that <unk> referenced earlier, but a big chunk of those cost synergies.
Mark L. Segal: <unk> will actually happen in Q3, and Q4, some of which all of volume specific but will also now based on the programs that we're actually implementing and getting some momentum behind.
Mark L. Segal: The third question you asked was about the dividend. I think what we try to do with the dividend and what the board considered was really to look at a reasonable dividend yield. If you looked at the previous dividend, it was around a 70, 80 basis point dividend yield, and we try to get it to around 1.5% at this point based on the current share price. Obviously, that will change as the price changes, but we felt that that was a comfortable place to be at from both the yield and a dividend power ratio perspective for 2024, taking into account our M&A innovation, allocation of cash, as well as the buyback It was an equation to keep all four in a reasonable balance, and that's where we landed.
Mark L. Segal: The third question you asked was around the dividend I think I think what we tried to do with the dividend and what the board considered was really to look at at a reasonable dividend yield. If you looked at the previous dividend. It was around 70 80 basis point dividend yield and we tried to get it to around one.
Mark L. Segal: You got it, Mark. Thanks very much.
Mark L. Segal: 5%.
Mark L. Segal: At this point based on the current share price, obviously that will change as the price changes, but we felt that that was a comfortable place to be at from both the yield and our dividend payout ratio perspective for 2024, taking into account al Emma.
Mark L. Segal: M&A innovation allocation of cash as well as the buyback program as well as.
Mark L. Segal: Debt reduction so it was an equation to keep all fall in a reasonable balance and that's where we landed.
Mark: Got it thanks very much that's helpful.
Operator: Okay, well, I think just from a time perspective, we're going to have to make that the last question. So, let me just say, we look forward to seeing you on the 31st of July, which is the date of our second quarter earnings call, and we'll wrap it up at that point. Thanks, Operator.
Speaker Change: Okay, well I think just from a time perspective, we're going to have to make that the last question. So let me just say a.
Operator: We look forward to seeing you on the 30 <unk> of July which is the date of our second quarter earnings call and we can wrap it up at that point. Thanks operator.
Operator: Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: Thank you ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect.
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